Russia’s Sovcomflot Says G7 Sanctions Make Oil Trade Less Safe

By Bloomberg News (Bloomberg) —

Russia’s state-run oil tanker company Sovcomflot PJSC said that western sanctions on ships moving the nation’s petroleum oil are only serving to heighten environmental risks by forcing some vessels out of mainstream trading.

Since late last year, US, European Union and UK authorities have ramped up measures on the Russian firm’s own vessels — as well as non-Sovcomflot ships that are deemed to be part of a large so-called shadow fleet.

Sovcomflot distanced itself from those shadow-fleet tankers, saying it adheres to the highest-possible safety standards.

However, the west’s restrictions have punished responsible shippers, and resulted “in deterioration of maritime safety standards – as perfectly maintained vessels are being pushed out of the trade,” Sovcomflot said in emailed comments to Bloomberg. This “severely escalates major environmental risks for the world’s oceans.”

Western authorities allow their firms to transport Russian crude, but only if the oil costs $60 a barrel or less. The sanctions were aimed at reducing the Kremlin’s energy-export revenues, a key source of funding for the invasion in Ukraine.

If traders want to move cargoes at prices above $60, they are barred from doing so with the use of western service providers such as shippers and insurers. That cuts the availability of industry-standard insurance and also access to some of the world’s more-reputable tanker owners.

While the west’s measures have also left a swath of Sovcomflot’s oil-tanker fleet blacklisted, the Moscow-based shipping giant is increasingly getting its vessels back to work. The use of such tankers for deliveries accelerated in August and is on course to surge further this month, shipping data compiled by Bloomberg show.

Shadow-fleet ships are often run by untraceable shell companies, lacking known industry-standard insurance while sailing under the flags of countries with poor standings for maritime safety oversight.

The growing number of such vessels has raised industry concerns about environmental and operational risks they pose, especially in busy maritime routes such as the Danish and Turkish straits, corridors for millions of barrels of Russian petroleum each month.

In May, German insurance giant Allianz SE estimated that the global shadow fleet, which includes vessels carrying Russian, Iranian and Venezuelan oil, has been “in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills.”

“The cost of dealing with these incidents often falls on governments or other vessels’ insurers if one is involved in an incident,” according to Allianz.