Biden pulled the biggest sanctions on Russian oil

At the beginning of 2022, Russia collected more than 350 million euros per day for oil exports. At the end of 2022, a price ceiling on Russian oil was introduced, while more and more European countries stopped buying Russian oil and replaced it with supplies from other sources.

Before Russia’s invasion of Ukraine, Russian oil producers accounted for 24 to 30 percent of European imports, or about 10 million tons a year. Now it is only a fraction of the original volume, imports to Europe from Russia have fallen by 93 percent. The last remnants of Russian oil flow through the Druzhba pipeline to Slovakia, the Czech Republic and Hungary. The Czech Republic will no longer buy Russian oil in 2025.

However, Russian oil companies did not mind, they redirected the oil flows to China and India, which now consume more than 80 percent of the volume. With the help of a shadow fleet of older tankers, Russia creatively obfuscates the origin of the oil, carries out transshipments on the high seas and even has several versions of the shipping documents for the oil on board. Using this tactic, it successfully circumvented sanctions and the price ceiling.

As a result, two years after the introduction of the price ceiling, Russian oil revenues are at the level of 250 million euros per day. The oil market remained stable, the price of oil even fell, but Russia was not significantly affected by the sanctions.

Penalties for second attempt

Ten days before the end of his term, Joe Biden pulled new sanctions aimed directly at Shadow Fleet vessels. It will be difficult to get around them, because another shadow fleet simply does not exist anymore. 180 vessels and several insurance companies that were created after the introduction of a price ceiling on Russian oil are affected.

The effect came immediately. Millions of barrels of oil and oil products remained trapped at sea, dozens of tankers remained stationary and dropped their anchors. Tankers transporting commodities to India, Turkey, Singapore are standing still. Others are in Russian and Chinese ports.

The consequences will be big and it is showing in the oil market. The price of oil rose above 80 dollars per barrel for the first time since the end of summer 2024. Considering the volume of stopped oil, it can be said that if it were not for the more than well-supplied market with a large reserve capacity of the OPEC cartel, the consequences would be much worse. Washington chose good timing when there is plenty of oil on the market. If he did that in 2023, there could be a problem.

According to Maritime Insights & Intelligence Limited, which collects detailed information on ship movements, up to half of Russia’s oil exports in recent weeks have been handled by a shadow fleet of tankers. If Russian exports reach 3.5 million barrels of oil per day and the journey of a tanker from Russia to China takes several weeks, there are about 70 million barrels of oil worth 4-5 billion dollars right now at sea. Half of it is on older and expiring tankers that have been hit by sanctions.

Who loses and gains