Shipping Sanctions Pose Big Risk to Russian Exports

The EU embargo grabs headlines, but shipping sanctions on Russia's oil exports pose another big risk to oil markets in the coming months. The EU's plan to stop buying Russian crude by Dec. 5 and products by Feb. 5, 2023 will force about 2 million barrels per day of Russian petroleum to find new markets. That alone will be a challenge, but shipping restrictions could reduce Russia's ability to export its oil, even if Moscow finds other buyers. There are simply not enough non-Western tankers to keep all this oil flowing and avoid more severe supply disruptions elsewhere, which has forced the EU to allow some exemptions. Shipping sanctions could hit Russia's refined product exports particularly hard. The US Treasury Department reckons that 75% of Russia’s refined products were exported on tankers with Western owners, insurance or financing. Greece alone handles almost 50% of Russian crude deliveries, traders note. Greece says it will comply with the plan despite owning about 20% of the world’s shipping tonnage, including more than half of EU tonnage. But the recent EU decision to allow third-country shipments of Russian oil was primarily driven by Greek lobby interests in a bid to protect a vital business. This carve-out provision leaves a backdoor for exports as some of the third countries buying Russian crude will re-export it as diesel to Europe. However, lower-profile players that have stepped in to keep supplying Russian products to European customers could face trouble in December.