New Delhi, November 01, 2023 : Russia’s swift build-up of a so-called shadow fleet of tankers – estimated to number more than 600 ships – has made the West’s oil price cap “unenforceable”, according to a new report from the World Bank.
As one of many sanctions measures put in place against Russia since it invaded Ukraine in February last year, the G7 group of richer nations brought in a price cap on crude oil last December followed by a similar measure for products in February this year.
The cap was designed to try and deny buyers of Russian crude the use of Western-supplied services, including shipping and insurance, unless cargoes are sold at or below the capped price.
However, the rise of the shadow fleet has circumvented these sanctions measures.
While Russia’s exports to the European Union, the US, Britain and other Western countries fell by 53% between 2021 and 2023, these have been largely replaced with increased exports to China, India and Turkey – up 40% over the same period, according to data carried in the World Bank’s latest Commodity Markets Outlook report.
“The price cap on Russian crude oil introduced in late 2022 appears increasingly unenforceable given the recent spike in Urals prices,” the World Bank said, referring to the benchmark Russian crude, currently quoted in the mid-$70s per barrel range, well above the G7-led $60 price cap for Russian crude.
“It seems that by putting together a shadow fleet, Russia has been able to trade outside of the cap; the official Urals benchmark recently breached the cap for more than three months, averaging $80 per barrel in August,” the report noted. according to the reports published in splash247.com .
The rise of shadow or dark fleet has seen many vintage ships given an extra stay of execution. Tankers still working above 20 years of age made up just 1% of the global tanker fleet pre-covid and were still a rarity at 3% before the invasion of Ukraine in late February last year. They’re now on track to make up 11% of all tanker demand by mid-2025, according to data from brokers Braemar.
