Russia has managed to keep getting its oil into world markets despite fears that sanctions imposed last month would cause exports to collapse.
A small office in a Mumbai suburb helps explain how Russian crude oil keeps flowing. The address is home to an Indian shipping company that was not managing a single ship as of 2022. She took control of two dozen tankers after the Russian military invasion of Ukraine and has tasked them with transporting Russian crude oil along newly established trade routes to the Mediterranean, Turkey and India, ship ownership and tracking data show.
Gatik Ship Management is among the most active of the emerging companies that have been buying up aging oil tankers to replace Western ships that no longer trade with Russia. This parallel fleet helps Moscow ship crude oil to buyers in Asia, according to shipping companies, brokers, and ship tracking, ownership and insurance data.
Subscribe to Newsletter
The logistics report
Top news and in-depth analysis from the world of logistics, from supply chain to transport and technology.
A person who answered the phone at Gatik’s office confirmed that the company managed about 25 tankers. He said he is an employee of a company that is part of the same group of companies as Gatik.
“The shipping market has always been able to adapt to political changes,” said Lars Barstad, chief executive officer of tanker owner Frontline Ltd.
A European Union oil embargo and a US-led price cap have turned the way Russia gets its oil to the market upside down. The price cap prohibits western shippers and insurers from trading Russian crude, which is trading above $60 a barrel. Many tanker owners have chosen to completely stay away from the Russian market. Russian oil is now sold primarily to buyers in Asia, requiring much longer crossings compared to Europe.
The resilience of Russian oil exports suggests the price cap is working as intended, preventing the European embargo from spiking oil prices while complicating Moscow’s ability to make the highest dollar on its exports.
“There’s no real indication that there’s a shortage of ships to transport the oil,” said David Wech, Vortexa’s chief economist, though he said problems could arise later.
Global benchmark Brent is trading at around $87 a barrel, not far above where sanctions went into effect on Dec. 5.
Russia’s oil industry, the lifeblood of its economy, still faces major challenges. Chief among them is the deep discount it offers on its crude oil to attract buyers. Another round of sanctions will hit key exports of refined fuels like diesel next month.
Russia is on track to export 158 million barrels of crude oil by sea this month, according to commodities data firm Kpler. That would be one of the best five months on record, but is partly a rebound from a drop in shipments after sanctions came into effect in December.
The availability of tankers is not a problem, Russian shipping managers said.
Also hard at work: A Dubai-based subsidiary of the state-owned Russian shipping giant PAO Sovcomflot. Some major Western shipping companies, including one of the largest Greek ones, also ship Russian crude oil and trade oil below the price cap.
A Sovcomflot spokesman did not respond to inquiries.
Gatik is one of the suppliers of tankers. It has taken 25 ships under its wing since June, according to a European Union shipping database. Their average age is 17 when tanker owners usually consider sending ships for scrapping.
According to the EU database, Gatik is the manager of the ships, not the owner. The registered owners of 20 of the tankers – many of whom are named after Greek mythological figures such as Elektra, Odysseus and Hector – share the same address in Mumbai as Gatik. The company that owns a Gatik tanker called Buena Vista that shipped Russian crude oil to India this month is Social Club Inc.
The oil tanker Hector, managed by Gatik Ship Management, moored at a terminal on the River Thames in England in December.
Photo: John Keeble/Getty Images
Corporate structures in which individual tankers are owned by different shell companies are common in the shipping industry.
In mid-January, Gatik’s 249-meter Atalanta loaded Russian Ural crude oil in Primorsk on the Baltic Sea. From there, the St. Kitts & Nevis flagged tanker sailed towards Vadinar on India’s west coast, data from Refinitiv and MarineTraffic shows.
Six other Gatik tankers were loaded with Russian crude between December 5 and January 14, including one that made the voyage twice, ship tracking data shows.
Gatik ships have sailed from Russia’s Baltic and Black Sea ports, where crude oil is trading below the ceiling.
Russia’s state-owned PAO Sovcomflot also ensures that Russian crude oil reaches world markets.
Photo: STRINGER/Portal
The US designed the sanctions so that Western and Japanese insurance clubs – associations that provide insurance cover against accidents such as oil spills – would insure tankers. According to an insurance database and a senior manager at the club, Gatik took out this coverage, called Protection and Indemnity Insurance, with the American Club.
Insurers require tanker operators transporting Russian crude oil to provide written assurances that the price will be below the cap in order to comply with sanctions.
Other ships carrying Moscow’s oil do so outside of the mechanism established by the cap. More than 75 shipments of Russian crude were loaded on tankers between December 5 and January 14 that had no insurance from Western and Japanese clubs, which dominate marine insurance, insurance data shows.
Tankers operated by Sun Ship Management, the Sovcomflot subsidiary in Dubai, accounted for 46 of the more than 160 shipments of Russian crude oil during that period.
Overall, tankers controlled by companies in the UAE, Hong Kong, China, India and Russia have shipped more than 60% of Russia’s crude oil since the price cap came into effect, according to Yen Ling Song, an analyst at S&P Global Commodities at Sea. while 29% moved on vessels under European control, mainly from Greece and Turkey. In contrast, European and American operators accounted for more than 90% of Kazakh oil shipments from Russian ports, showing how western shippers avoid Moscow’s crude. Ships carrying Russian oil were six years older on average.
SHARE YOUR THOUGHTS
How should the US and its allies respond to Russia’s ability to keep oil flowing to world markets? Join the conversation below.
Some mainstream tanker operators make use of the price cap. Among the most active is Greece’s TMS Tankers Ltd., founded by shipping magnate George Economou and part of TMS Group. TMS-managed tankers loaded Russian crude oil 14 times between Dec. 5 and Jan. 14, shipping data shows.
A TMS spokeswoman did not respond to requests for comment. TMS tankers such as Lipari, Stamos and Lovina fetched Russian crude oil from the Baltic Sea and Murmansk in January. People familiar with the broadcasts said.
According to a spokeswoman for the insurance association, the TMS tankers were at Norway’s Gard P. & I. (Bermuda) Ltd. insured. “Nobody wants an uninsured tanker to run aground on their shore,” she said.
US gas prices have been ebb and flow throughout the year and now further uncertainty is looming as a European Union embargo on Russian oil imports comes into effect along with a price cap on crude oil from Russia. WSJ explains how these moves could affect prices at the pump for Americans. Figure: WSJ
– Caitlin Ostroff contributed to this article.
Write to Joe Wallace at [email protected], Costas Paris at [email protected], and Anna Hirtenstein at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8