Dark activity & deceptive shipping – lessons from the Russia-Ukraine conflict
- Some of these vessels were sold to companies based mostly in Turkey, Singapore, United Arab Emirates, and Norway. The same places that housed the top buyers of Russian-affiliated vessels before the war.
- It’s interesting to note that Hong Kong was one of the leading countries in terms of its companies buying Russian-affiliated vessels in 2021, but since the invasion, they only bought one. On the contrary, Latvian companies, who only bought two vessels in 2021, have already bought six Russian-affiliated vessels since the beginning of the invasion. This is in addition to five more ownership changes from Russian to Latvian entities.
Windward insights also show a significant and steady increase in dark activity by Russian-affiliated oil tankers since the beginning of the Russian invasion of Ukraine, due to the series of moral restrictions and official sanctions that emerged.
- Before sanctions were put into place, the average number of dark activities by Russian-affiliated oil tankers was 1.9 per day.
- That number has since more than tripled to a daily average of 6.3 dark activities.
- Before the invasion and subsequent sanctions, Russian crude oil tankers were barely involved in dark activities, with a weekly average of 1.1 such activities per week. Between February 24 and May 24, that number skyrocketed to 10.75 dark activities on average per week!
- 41.8% of sanctioned Russian oil is going to China, the majority of it through two main STS hubs – Denmark (three meeting events) and South Korea (six meeting events).
- One such example is the Yang Li Hu vessel detailed in Business Insider. This crude oil tanker, flying the Chinese flag, is operating a busy line between Russia and South Korea, with many STS operations.
- In the satellite image presented below, we can see two tankers, with three service vessels by their sides. The bigger tanker on the right hand side is the very large crude carrier (VLCC) Yuan Qiu Hu, and the tanker on the left hand side is the Aframax Yang Li Hu.
- Yang Li Hu departed from Kozmino port in Russia on May 17, 2022, reporting an almost fully laden draft of 15.2m.
- It then arrived at the port waiting area of Gwangyang in South Korea on May 19.
- Following its arrival in South Korea, it engaged in a ship-to-ship (STS) operation with the VLCC tanker (Yuan Qiu Hu) that arrived from the port of Ningbo, China.
- The two tankers were assisted by three local South Korean-flagged tankers.
- When the operation ended, the Yuan Qiu Hu sailed to Lanshan, China with the Russian oil, while the Yang Li Hu sailed back to the port of Kozmino, probably to bring more oil back to the meeting point.
- While the Business Insider article states that some shipbrokers said these STS are not performed to avoid sanctions, but rather because the availability of tankers is decreasing, it is difficult to understand the operational or commercial rationale
- The Yuan Qiu Hu VLCC returned to China only ¾ laden. Had there been a real tanker-availability problem with moving Russian oil legally, it would have been fully laden to optimize the trade.
- To further investigate the shift in trade, we compared the last status image (April-May 2022) to the same timeframe in 2021. It seems like the commercial activity in the area has actually increased since 2021, but changed course, as almost no vessels go north of Romania.
- There was a spike in commercial port operations by tanker and cargo vessels in Romania and Bulgaria during the first few weeks after the invasion. But it seems that as the conflict continues, business is going back to normal and port calls are back at their usual rate in all Black Sea ports.
- In March-May 2021, the monthly average number of port calls in the Black Sea area was 3,481. During the same time period of 2022, that monthly average only went down by 17.5% to 2,870 port calls per month.
- Diving into the sub-class details for the same timeframe shows that port operations decreased by 16% for bulk carriers, by 46% for container vessels, and by 20% for general cargo vessels – clearly disrupting the wheat export trade flows from Ukraine and the area (trade lines that usually use these types of vessels).
- On the contrary, crude oil tankers saw a 25% increase in port operations in the area when comparing March-May of 2021 to March-May 2022. This raises questions since the area is not a major oil trade hub…
- The country that has suffered the most commercial damage so far is of course Ukraine, with a 36% drop in its monthly average of commercial port calls compared to 2021.
- When we deep dive into the Windward data on Ukrainian ports, we see yet another effect of the invasion on the trade flows in the area. The data clearly indicates that Izmail, a minor port near Romania, has adapted to the new trade landscape and has been stepping up to keep international trade flowing.
- In March-May 2021, Izmail port had 337 port calls by international tankers and cargo vessels. This number increased to 494 during the equivalent period in 2022.
- Having this much container and cargo traffic diverted to a smaller port than usual definitely creates port congestion and greatly disrupts the supply chain to the entire Black Sea area.