🇷🇺 Oil Revenues Increase, More Sanctions on Shadow Fleet Needed

In July 2024, Russian oil export revenues rose to $17.1 billion due to higher crude and oil product prices, according to the KSE Institute’s August ‘Russian Oil Tracker.’ Despite slightly lower export volumes, Russia continues to actively use its shadow fleet and significantly exceed the oil price cap.

Russian seaborne oil exports decreased by 3% in July, driven by a 9.5% MoM drop in crude shipments. However, this decline was not due to lower oil demand but to Russian refineries returning to operation after being damaged by Ukrainian attacks. With more crude being refined, oil product exports increased by 6.6% MoM.

Weak enforcement of price caps allowed Russia to earn $17.1 billion in July—$11.1 billion from crude oil and $6.0 billion from oil products. In July 2024, Urals FOB Primorsk and Novorossiysk rose by $4.3 and $4.5 per barrel to around $72, while ESPO FOB Kozmino increased by $1.3 to $78 per barrel. The discounts on Urals FOB Primorsk and Novorossiysk to ICE Brent narrowed to $12.0 per barrel and $11.6 per barrel respectively, the lowest level since the invasion. With the EU and G7 price cap at $60 per barrel, and an average export price of nearly $75 per barrel, this shows a significant breach of the cap.

Russia heavily relies on its shadow fleet to bypass oil price caps, transporting 90% of crude oil with these vessels. In July 2024, 198 loaded shadow fleet tankers left Russian ports, with 4 involved in STS transfers. Notably, 82% of these tankers were over 15 years old. Russia’s reliance on Western maritime services remains low, with only 9% of crude oil and 65% of oil products shipped on tankers with IG P&I insurance.

Russia’s shadow fleet uses flags from countries with lenient regulations or no sanctions. The top flags for these tankers are Panama, Gabon, and the Cook Islands. This allows Russian ships to continue transporting oil without breaching international regulations.

To counter these violations, the United States, European Union, and United Kingdom have sanctioned 64 Russian shadow fleet vessels. Russia continues testing the effectiveness of tankers’ designations as 9 out of 64 designated tankers returned into service after staying empty and idle for a long time.The other tankers have been removed from commercial service.

Ship managers from the UAE, China, and Greece continue to help Russia evade oil price caps. Stream Ship Management Fzco (UAE) was the top crude oil shipper for the fifth consecutive month, though its share dropped by 6% to 16% in July. Five Chinese and two Greek companies accounted for 15% and 6% of Russian crude exports, respectively. Greek companies also led in oil product exports, holding six of the top ten spots and making up 17.4% in July 2024.

Moreover, demand for Russian oil remains strong. India is the largest importer of Russian crude, and Turkey leads in oil product imports. In July 2024, India’s crude imports dropped by 31.8% to 1,342 kb/d but remained the highest. China’s imports held steady at 1,081 kb/d. Meanwhile, Turkey’s oil product imports rose by 30.8% to 516 kb/d, the highest since March 2024.

KSE Institute projects Russian oil revenues to reach $192 billion and $139 billion in 2024 and 2025 under the base case with current oil price caps and stronger sanctions enforcement. However, if sanctions enforcement is weak, Russian oil revenues could increase, reaching $200 billion in 2024 and $184 billion in 2025.