Russian oil firm Sovcomflot says G-7 sanctions make oil trade less safe

Russian state oil company Sovcomflot PJSC said Western sanctions on ships carrying the nation’s oil only served to increase environmental risks, forcing some vessels out of regular trade.

Since late last year, authorities in the US, European Union and Britain have stepped up measures on the Russian company’s ships, as well as on non-Sovcomflot ships that are believed to be part of a so-called large shadow fleet.

Sovcomflot has distanced itself from those shadow tankers, saying it adheres to the highest possible safety standards.

Insurers say oil tankers in the dark fleet pose a major risk of damage

However, Western restrictions have punished responsible shippers and led to “the deterioration of maritime safety standards – as perfectly maintained vessels are pushed out of trade,” Sovcomflot said in emailed comments to Bloomberg. This “seriously escalates major environmental risks to the world’s oceans.”

Western authorities allow their firms to transport Russian crude, but only if the oil costs $60 a barrel or less. The sanctions were aimed at reducing the Kremlin’s income from energy exports, a key source of funding for the invasion of Ukraine.

If merchants want to move goods priced above $60, they are prohibited from doing so using Western service providers such as forwarders and insurers. This reduces the availability of industry standard insurance and also access to some of the more reputable tank owners in the world.

While the Western measures have also blacklisted part of Sovcomflot’s tanker fleet, the Moscow-based shipping giant is increasingly putting its vessels back to work. The use of such tankers for deliveries accelerated in August and is on track to increase further this month, shipping data compiled by Bloomberg show.

Shadow fleet vessels are often run by untraceable shell companies, lacking industry-known standard insurance while flying the flag of countries with a weak position for maritime safety oversight.

The growing number of such ships has raised industry concerns about the environmental and operational risks they pose, particularly in busy shipping lanes such as the Danish and Turkish straits, corridors for millions of barrels of Russian oil each month.

In May, German insurance giant Allianz SE estimated that the global shadow fleet, which includes vessels carrying Russian, Iranian and Venezuelan oil, had been “in at least 50 incidents to date, including fires, engine failures, collisions , loss of leadership and oil spills.”

“The cost of handling these incidents often falls on governments or insurers of other ships if one is involved in an incident,” according to Allianz.

Photo: oil tanker Sovcomflot; photo credit: Emerov Sergey/OAO Sovcomflot via Bloomberg

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