Issued by CEMO Center - Paris
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"Iran's 'Ghost Fleet' Hides Russian Oil Amid Sanctions"

Tuesday 07/February/2023 - 06:34 PM
The Reference
Ahmed Seif Eldin

A new development in the world of oil trade has emerged as Iran's "ghost fleet" of vessels, used to breach US sanctions, has started carrying Russian oil in recent months. Financial Times research shows that 16 vessels in the sanctions-busting network have switched to Russian crude since December, as western sanctions on Moscow intensified and the Kremlin started using techniques pioneered by Tehran.


These "ghost ships" disguise their ownership and movements to facilitate sanctions-breaking trade, especially in Iranian and Venezuelan oil. Russian oil is reportedly more attractive to tanker owners and operators due to premium rates offered by Moscow, who is trying to protect its main source of export revenue from western restrictions like the G7/EU oil price cap. The increased trade in Russian crude has reportedly boosted the tanker market, with the volumes of Russian crude shipped on vessels identified as being part of the ghost fleet surging from less than 3 million barrels in November to over 9 million barrels in January.


Although competition for vessels could create tension between Russia and Iran, an increase in the number of ships owned through secretive offshore entities has helped avoid problems with sourcing vessels. Some shipbrokers say terms made the Russian trade more attractive than dealing with Iran or other heavily sanctioned countries like Venezuela, and many operators are willing to participate given the rates on offer and the leeway in rules.


The FT identified the vessels involved in the Iranian ghost fleet using a list of 288 ships subject to sanctions-breaching complaints, which were provided by United Against Nuclear Iran, a US-based group advocating for tough enforcement of sanctions. The data was then monitored by Kpler, a data and analytics company.


Strains in the tanker market are expected to worsen in the coming weeks as EU sanctions and the G7 price cap have been extended to include Russia's exports of refined fuels like diesel and petrol. The ban on seaborne imports of Russian crude to the EU has already rerouted a lot of Russian crude to Asia, and now similar restrictions on diesel and other fuels will likely increase shipping distances.


Russia's oil is still being transported in tankers with western insurance, which is only available if the oil was bought for less than the price cap. The discount for Russia's main export-grade Urals oil has fallen to $30-$40 a barrel below benchmark international crudes like Brent. The discount is partly to cover shipping costs and due to lower prices negotiated by refiners in India and Turkey for crude that once flowed to the EU.


The line between the grey market and the conventional tanker market has reportedly gotten blurrier in the past year, as many operators are willing to participate in the trade of Russian oil despite the sanctions. Some of the ships now serving the Russian route are even vessels previously identified as likely to be part of Moscow's shadow fleet, consisting of around 100 vessels. The ownership of the ghost fleet is often disguised through front companies that keep changing to avoid sanctions, according to Claire Jungman, chief of staff at UANI.