Russian Crude Faces Mounting Sanctions Pressure
At least two blacklisted tankers carrying 1.4 million barrels of Russian crude are tracked at anchor outside the port of Mundra, India, in the first signs that fresh Western sanctions on Rosneft and Lukoil are curbing exports.
Sierra Leone-flagged Kusto (IMO 9308833) and Ailana (IMO 9232888) have been waiting since October 30 and October 25 respectively, Windward analysis shows.
The delays are one of many market signals that a sanctions shakeout for Russian oil is under way after the EU, UK, and US all imposed penalties designed to cut crude exports last month, reversing a long-held policy of nearly three years.
Game-changing US sanctions on the two largest oil producers Rosneft and Lukoil announced by the Office of Foreign Asset Control (OFAC) on October 22 affect nearly half of Russian exports, with licenses allowing wind downs expiring November 21.
The UK had sanctioned Rosneft and Lukoil a week earlier, leaving the G7 oil price cap imposed in December 2022 largely irrelevant, triggering oil price spikes. The cap aims for Russian oil to flow while reducing income to the Kremlin. These measures now restrict crude exports for the first time.
In the past two weeks, some refiners in India and China, the biggest purchasers of Russian crude, paused or signaled they will reduce purchases, likely behind the Kusto and Ailana delays.
Any wider impact hinges on whether the US follows through with enforcement after November 21.
Freight Rates Surge as Dark Fleet Expands
The EU’s 19th sanctions package followed a day after the shock OFAC sanctions on Rosneft and Lukoil. Another 117 ships were designated alongside bans on liquefied natural gas imports from as early as April, in addition to bank transaction bans and penalties on two Chinese refiners and an oil trader.
The combined impact of UK, EU, and US actions helped lift freight rates to a five-year high this week, as oil-on-water numbers remained at a record, amid increased dark activity and nascent changes to the fleet composition of tankers calling at Russian oil export ports.
Very large crude carrier rates surpassed $125,000 daily on Middle East Gulf routes, according to shipbrokers, as Indian and Chinese buyers sought alternative cargoes to avoid Russian sanctions, and OPEC+ producers relaxed production curbs alongside a seasonal winter oil demand uplift.
So-called “clean” tankers sought for Russia trading are also shrinking availability in non-sanctioned trades, underpinning stronger demand.
While extra Middle East cargoes contribute to record volumes of oil on water, the numbers also reflect rising logistics challenges for Russian and Iranian crude.
Some 54% of Russian oil was loaded on sanctioned tonnage over October, Vortexa and Windward data show. This underscores the need for clean tonnage not just at export ports but for ship-to-ship transfers to onward destinations that won’t accept blacklisted ships.
Tankers that are not sanctioned, nor seen as part of the sanctions-circumventing dark fleet, are highly sought after. This has added to supply chain bottlenecks, especially now that EU- or UK-designated ships surpass 500 vessels.
Crude oil in transit peaked at 1.3 billion barrels on October 25, up 200 million barrels in six weeks, according to Vortexa. Iranian and Russian oil-on-water numbers hit records in late October, days after the OFAC sanctions were announced on Lukoil and Rosneft.
There are very few non-sanctioned, elderly, anonymously owned dark fleet tankers that have been solely deployed in Russian crude trades for the past three years.
Analysis shows a new cohort of Russia-trading tankers has emerged over the past three to four months. Tankers built in 2011 and earlier are being bought by anonymous Chinese or Hong Kong entities that immediately sail the ships to Russia to load crude. Many were formerly owned by European companies.
New owners are hidden behind single-ship special purpose vehicles for registered owner, ship manager, and technical manager in China, Hong Kong, or Seychelles. There were at least 17 of these tankers tracked loading Russian oil grades over October, equally divided between Baltic ports and Pacific ports.
India’s Refiners Test the Limits of Compliance
Fewer Greece-owned ships are tracked lifting Russian crude since August after the EU first flagged the 15% lower price cap would be introduced from September. Until then, Greece-owned tonnage lifted as much as 35% of Urals grade over 2025 when it was priced under the $60/bbl G7 oil price cap.
That percentage dwindled to about 19% over August and September as new levels placed the globally assessed price of Urals above the new price cap of $47.60/bbl.
October saw at least 26 Greece-owned tankers loading 16% of crude, mainly from Baltic and Black Sea ports, based on Windward analysis combined with preliminary data from commodities tracker Vortexa. A wind down for old contracts ended October 18.
(Under the price cap, Western marine service providers including charterers, shipowners, insurers, banks, and oil traders can’t ship Russian crude to third countries without attestation it was bought below the cap.)
The fate of Kusto and Ailana could provide a market signal on how seriously US sanctions weigh on Russia’s biggest crude buyers. The terminal at Mundra serves both the Indian government-owned Indian Oil Corp and HPCL-Mittal Energy refineries.
HPCL has reportedly ended Russian crude purchases after an adverse media report. Tankers have been noted temporarily at anchor outside ports elsewhere in India for up to a week with Russian cargoes before eventually discharging, attributed to uncertainty over Indian policy direction.
The Nayara refinery at Vadinar, 49% owned by Rosneft and sanctioned by both the EU and UK in past months, is exclusively importing Russian grades, including a recent cargo from the falsely flagged Boracay tanker, fresh after its interdiction with the French navy.
Oil traders report Russian crude discounts are widening as grades compete against Iran for limited buyers in China, mostly independent refineries.
Oil flows are expected to get darker in coming weeks with deceptive shipping practices seen amplified, especially if the US secondary sanctions threat is realized.
This will include GPS jamming at export ports, GNSS manipulation or going dark to hide loading and discharging, subterfuge ship-to-ship transfers, false and fraudulent documentation, and use of falsely flagged ships. New UAE-based front companies and oil trading intermediaries are expected to emerge to place purchasing distance between Rosneft and Lukoil cargoes.
Compliant tonnage may likely be wary of lifting clean cargoes from Russia even though it is not breaching the G7 price cap of $100/bbl on refined products. The global tanker market remains in the geopolitical crosshairs and on the front line of an unprecedented sanctions experiment.
UPDATE: Cargo from Ailana was transferred to another sanctioned tanker, Fortis, on November 6. That vessel is now signaling its next port of call as Ningbo, China. After waiting from October 30 to November 4, Kusto also departed India, arriving in Duqm, Oman, on November 7. Tracking showed the tanker met with a tug on November 3, but its AIS later indicated a draft change suggesting it was no longer laden, even though no other tanker was detected via AIS conducting a transfer.
