Putin says Russia will return to Black Sea grain deal if a string of calls for are met
In his latest weekly Tanker Opinion, Erik Broekhuizen, head of tanker analysis at New York headquartered Poten & Partners, says that, whereas Russian oil exports have to this point solely been impacted by restricted sanctions, the common age of the Aframaxes tankers, which carry the overwhelming majority of Russia’s exports has already elevated markedly. With an EU import ban and the G7 oil worth cap within the works, Russia could flip more and more to the so-called Dark Fleet.
Those ships are older, much less effectively maintained and managed and pose a security menace.
Poten cites two latest incidents that spotlight the potential dangers. In one “a 20-year old Aframax loaded with Russian crude was briefly adrift off the Spanish coast. The vessel, which was en route from Primorsk to Turkey, needed to make repairs and was only allowed to proceed with her voyage after several deficiencies had been corrected.” That similar week, “a laden VLCC, this one 21 years old, ran aground off Indonesia. The VLCC was reported to be carrying a cargo of crude oil from Malaysia to China. No spills were reported with either incident. However, there are some common threads that are reason for concern. Both vessels were old, 20 and 21 years respectively, and both have had multiple deficiencies in the last 12 months. The VLCC in question was recently blacklisted by the U.S. Treasury’s Office of Foreign Asset Control (OFAC) because it was part of the so-called ‘Dark Fleet,’ involved in the illicit transportation of Iranian oil.”
What is the Dark Fleet? One manner of defining it may very well be all of the ships operated by shipowners utilizing the misleading transport practices recognized within the May 2020 Sanctions Advisory issued collectively by OFAC, the U.S. Department of State, and the U.S. Coast Guard. Up till Russia began feeling the chew of sanctions, these ships have been primarily engaged in evading sanctions on Iran and Venezuela.
“Reputable shipowners do not want to get involved in these trades, limiting the supply of vessels. This has made moving sanctioned barrels extremely lucrative,” says Poten. “While this market is by nature very secretive, estimates from knowledgeable observers suggest that shipping rates for Venezuelan or Iranian barrels can be two or three times the market rate for legitimate voyages. These premium earnings have created a strong incentive for opportunistic, less scrupulous owners to get involved in these trades. Given the fact that the nature and longevity of these sanctions is very unpredictable, almost all tankers involved in these trades are older units. Owners of vessels buy them for the specific purpose of utilizing them in these illicit trades and they want to be able to earn their money back in a short period of time. The downside of an older (cheaper) ship is more limited. They buy old vessels (frequently vessels that would otherwise would have been recycled) and spend the bare minimum on repairs and maintenance. The illegal nature of the business makes it impossible to use reputable crew managers and arranging proper insurance is difficult as well. To obfuscate the illicit nature of their employment, owners of these tankers frequently change the vessel’s name and ownership and flag them in jurisdictions that are known to be less strict. As a result of these factors, the risk that these vessels are involved in accidents is elevated and so is the potential harm that could be inflicted on the crews and the environment (in case of an oil spill).”
DARK FLEET GROWS
How massive is the Dark Fleet? United Against Nuclear Iran says that in November 2020 it recognized 70 overseas vessels suspected of involvement within the illicit switch of Iranian crude oil and/or petroleum merchandise. “Two years later,” it says, “the list has grown to 257.”
With sanctions on Russian crude tightening, Poten experiences that “in apparent anticipation of the need for a larger Dark Fleet, sales of secondhand tankers have been brisk this year, despite the fact that prices for older vessels have increased markedly over time. At least 60 VLCCs, 42 Suezmaxes and 93 Aframaxes have changed hands YTD, with an average age of more than 15 years.”
“If Russia will start utilizing more vessels from the Dark Fleet, the average age of their export tankers will rise dramatically and (unfortunately), so will the risk of incidents,” warns Poten.
