Russia's Evasive Tactics to Sustain Oil Exports Amid Sanctions

In response to Western sanctions, Russia has turned to non-sanctioned vessels and has begun rerouting other ships to continue exporting oil. However, this strategy risks exposing those vessels to future sanctions, thereby jeopardizing their operation. Economists and energy experts have pointed out that Russia's "shadow fleet," composed largely of outdated and uninsured ships, is an essential tool for circumventing these sanctions.

Recently, the U.S. Treasury implemented expansive sanctions on 183 ships controlled by Russia, which significantly impacted over two-thirds of the tankers operating out of Kozmino – a primary oil export hub in Russia's Far East. According to energy analyst Petras Katinas, once a ship is sanctioned, it will likely face difficulties accessing ports, as they will refuse to handle its cargo. Consequently, this situation compels Russia to seek replacements quickly to sustain its export capabilities.

Despite increasing sanctions targeting Russia's shadow fleet, experts were not surprised by the country's utilization of non-sanctioned vessels or the associated risks. In fact, nations like Barbados and Panama have recently delisted significant numbers of sanctioned Russian vessels to evade potential fallout. Polish economist Benjamin Hilgenstock highlighted that every sanctioned vessel removal from operations entails substantial costs for its operators and that Western nations can continue to apply sanctions on any new ships that join Russia's fleet.

As sanctions are aggressively pursued—reportedly involving around 275 vessels across various jurisdictions—analysts agree that finding alternative methods for oil exports will remain a priority for Russia due to its economic significance. Notably, oil and gas revenues are estimated to account for roughly 30% of Russia's federal budget for 2024. Additionally, Alexander Novak, Russia's deputy prime minister, noted the daunting budget allocated for national defense, which further underscores the high stakes surrounding oil revenue as it relates to ongoing conflicts.

Research fellow Gonzalo Saiz Erausquin emphasized the need for the G7 and allied nations to stay vigilant in identifying vessels that belong to Russia's shadow fleet. He pointed out that oil revenue is critical for Russia, calling it a "lifeline" in its ongoing war efforts. Consequently, the country may continue to invest heavily in maintaining oil exports, potentially resulting in increasing operational costs.