Home / Shipping News / International Shipping News / More sanctions on Russian oil tankers

More sanctions on Russian oil tankers

On January 10, 2025, the United States announced a massive sanctions action covering 183 Russian-controlled and shadow fleet ships. This round of sanctions is by far the largest such action toward limiting Russian oil tanker capacity, with especially acute implications for Russia’s Pacific ports. Yet, despite the sweeping nature of this action, global oil prices have not seen a sustained rise since the announcement—indicating additional room to sanction more shadow fleet oil tankers without risk of roiling global energy markets.

This evidence justifies our prior calls for more sanctions on Russian oil tankers, in which we argued that further sanctions would weaken Russia’s trading activity while also adding to the mounting strain on the Sovcomflot fleet—with limited risk for spiking global oil prices.

Mounting pressure on Russia’s oil tanker fleet, especially in Pacific ports
The January 10 announcement that the U.S. would sanction 183 Russian-controlled ships was by far the largest such action since Russia invaded Ukraine. To assess the magnitude of this action, we use Bloomberg data on oil tanker traffic to compare the capacity contraction in January to past rounds of sanctions, notably those announced February 23, 2024 (when the U.S. sanctioned 14 oil tankers), and sanctions on six oil tankers prior to that.1 Following the Treasury convention of distinguishing between Russian-owned ships and the ships that operate as part of the shadow fleet, we differentiate between sanctions on ships owned or controlled by Russia—mostly Sovcomflot (SCF) ships—and shadow fleet ships that are not explicitly under Russian control.

As shown in Figure 1, sanctioned Russian-controlled ships are about 10% of total oil tanker capacity out of Russian ports (black line), while sanctioned shadow fleet vessels comprise another 20% (orange line). This is substantially above previous rounds of sanctions, which encumbered at most 5% of total capacity at the time those actions were announced.

Russia has three main clusters of oil export ports: those in the Baltic, those in the Black Sea, and those in the Pacific. Black Sea ports deserve special mention, since the Caspian Pipeline Consortium (CPC) terminal, which makes up the bulk of Black Sea volumes, handles mostly Kazakh oil. The exit points carrying the highest volume of Russian seaborne oil are thus the Baltic and Pacific. As shown in Figure 2, the Russian-controlled ships sanctioned on January 10 comprise about 10% of total capacity out of the Baltic (black line), while sanctioned shadow fleet vessels make up another 15% (orange line). Figure 3 shows the same trend for the Black Sea ports—of less relevance since much of the oil here is of Kazakh origin—while Figure 4 shows the Pacific, where Russian-controlled and shadow fleet vessels are especially important. Indeed, sanctions on Russian-controlled vessels may hit as much as 20% of total capacity out of Russia’s Pacific ports (black line), while they hit up to 60% of total capacity out of the Pacific where shadow fleet vessels are concerned (orange line). In short, the potential hit to oil tanker capacity out of Russia’s ports—especially in the Pacific—is significant and far above anything in previous rounds of sanctions.

Sanctions’ extremely limited price impact
Despite the large magnitude of shipping capacity affected, there has been limited correlation between the Treasury sanctions announcement and sustained movements in oil prices. The global Brent oil price rose from $77 per barrel prior to the January 10 announcement to $80 later that day, a rise of almost 4%. Since then, the Brent oil price has fallen back to around $77 per barrel, in line with previous instances when news of the G7 oil price cap and OPEC+ production cuts did not result in meaningful oil price spikes.

The most likely explanation for the lack of an enduring price rise is that energy markets—which are forward-looking—did not expect the sanctions to disrupt production. Specifically, markets likely anticipated—in line with prior sanctions announcements—that oil tanker activity would shift from sanctioned to nonsanctioned ships, which would mute any supply-driven price rise. This outcome would be especially desirable if the nonsanctioned ships in question operate in compliance with the G7 oil price cap, constraining oil revenues going to Russia while maintaining global production. It is possible that oil prices remained stagnant due to the offsetting impact of anticipated higher OPEC+ supply or weaker global demand, although we find this largely implausible due to the lack of substantial new information that would drive such expectations.

Ultimately, given that the January 10 sanctions had a sizable impact on shipping capacity but with no obvious enduring price impact, further sanctions on shadow fleet oil tankers can likely be levied without any meaningful spike in global oil prices. We conclude by noting that shadow fleet oil tankers are especially prevalent in the Baltic Sea and recommend that policymakers target ships in this region in future rounds of sanctions.
Source: The Brookings Institution

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping
error: Content is protected !!
×