Can the EU Blockade Russian Oil Smuggled Into It?

European countries are struggling to curb the influx of Russian oil imports that have continued to reach their shores despite the sanctions imposed on Moscow over its role in the Ukraine war.

According to Western media reports, Russia has been using a “shadow fleet” of tankers to evade the restrictions and smuggle its crude to several EU nations.

The EU is trying to counter this illicit activity with a strict plan to crack down on the smugglers and penalize the countries that cooperate with Russia in disguising these exports. This plan was discussed at an EU technical meeting that reviewed the 11th package of sanctions on Moscow.

European officials and diplomats praised the seriousness of the EU’s efforts to close the loopholes that allow Russian oil to flow into European territory, and said that these efforts have wide support from member states.

 

‘Shadow Fleet’

The European Union is preparing to confront Russia over its covert oil exports that evade Western sanctions and reach the bloc’s ports, according to a report by Politico.

The report cited a draft European plan that would ban ships carrying Russian crude oil from docking at EU harbors if they are found to have switched off their tracking devices or sailed outside the usual routes.

Politico also quoted an unnamed European diplomat who said the EU “has no red lines” on tackling the issue of Russian oil smuggling.

The report was based on data from Windward, a shipping research company, that showed unidentified oil tankers leaving Russian ports and heading to the central North Atlantic, where they would turn off their radio and radar transmitters to avoid detection.

The tankers would then reappear as they returned to Russian ports, suggesting that they had unloaded their cargo somewhere along the way.

The data indicated that Russia was using this method to bypass Western sanctions on its oil sector, imposed after its annexation of Crimea in 2014 and its involvement in the conflict in eastern Ukraine.

The sanctions include a ban on EU imports of Russian oil by sea and a U.S.-led price cap that limits Russian oil to a maximum of $60 per barrel.

However, the data also showed that the number of these tankers was not enough to carry all of Russia’s oil exports, which are vital for its economy.

The Financial Times reported in October that a surge in anonymous tanker sales to new and unknown buyers was likely linked to Russia’s efforts to create a hidden fleet.

An analyst for Braemar, a shipping broker, told the newspaper that the shadow fleet consisted of “vintage” ships that were old and rickety but could fetch high prices in the lucrative oil smuggling market.

The analyst estimated that there were about 100 such ships in operation, but they were still not enough to carry even half of Russia’s oil exports.

 

Oil Flow

Politico suggests that Russian oil may be bypassing the European embargo by mixing and disguising its origin in the global market, a practice that experts say is common and hard to trace.

The report cites Mikhail Khodorkovsky, a former CEO of Russian energy giant Yukos and one of Putin’s most prominent opponents, who said that unlike gas exports via pipelines, the international oil market is open to all countries and allows for camouflaging the source of crude.

The report also quotes Saad Rahim, chief economist of the Trafigura oil commodities trading group, who said that Russian oil could still be sold to the European Union and Western countries through intermediaries, despite the closure of the European market to Urals crude.

The issue of possible sanctions evasion by Russian oil was raised in the European Parliament last year when French MP Francois-Xavier Bellamy questioned whether Azerbaijani exports were a loophole for Russian oil. He pointed out that Azerbaijan exported 242,000 barrels per day more than it produced between April and July 2020, a large margin on domestic production capacities.

The commission denied the suspicions raised by the MP, saying the data he cited occurred before the sanctions came into effect, and there was no doubt about sanctions evasion there.

Russian oil production remained at its levels even after the sanctions were imposed in January 2022. According to figures from the International Energy Agency, the European Union imported about 600,000 barrels of Russian oil per day, in addition to 700,000 barrels of Russian oil products, as of January 2023.

In contrast, after the European embargo, Moscow has worked to expand its oil customer base. Thus, Russian oil exports to China rose from 1.7 million barrels per day in 2022 to 2.3 million barrels per day in 2023. Exports to India also jumped significantly, from 100,000 bpd in 2022 to 1.6 million bpd in 2023, according to the International Energy Agency.

On the other hand, despite the closure of the European market to Urals crude, Russian production remained at its levels, prompting Saad Rahim, chief economist of the Trafigura oil commodities trading group, to conclude that “it is possible that Russian oil is still sold to the European Union and Western countries through intermediaries.”