How many ships are in Russia’s “ghost fleet” of tankers? No one has a clear idea: estimates run from 100 to 600 tankers depending on whether you include the old tankers Russia has been snapping up in the last year or the dark fleets operated by Russia’s partners like Iran and Venezuela that have been under sanctions for years. But clearly the size of the fleet is significant and able to carry a large share of sanction-busting crude and products to non-aligned countries around the world.
Russia has spent a total of $2.2bn assembling the fleet, of which $850mn was spent in the last year on expanding the dark fleet. If the fleet really is 600 ships-strong then that is enough to carry all of Russia’s oil exports to “friendly countries”, as experts estimate it needs some 240 tankers for its seaborne oil export trade.
Getting hold of enough tankers is a crucial problem for Russia, as insufficient numbers will lead to infrastructure constraints on exports and production. Not surprisingly, Russia is attempting to route deliveries in a way that minimises shipment times, and thus costs, think-tank Bruegel said in a recent report.
The first option open to Russia is to make more use of its oil pipelines. Russia exported over 6mn barrels per day in 2022, of which about 2mn bpd left by pipeline – mainly the Druzhba pipeline with a capacity of 1.4mn bpd that runs from Siberia to Central Europe, and the Eastern Siberia-Pacific Ocean (ESPO) that connects to China with a capacity of around 1mn bpd.
“Together with another pipeline through Kazakhstan to the Black Sea port of Novorossiysk, ESPO allows Russia to route around 15-20% of its crude oil exports through channels that cannot be reached by international sanctions,” SSRP said in a recent report.
“Russia has attempted to route larger quantities through its Russian Pacific Oceanport at Kozmino. But as we see with ESPO – which also supplies crude oil to Kozmino – Russia’s ability to redirect exports is limited by the existing infrastructure. Ports close to China and India are reaching capacity limits, while those freed up by the loss of the European market (in the Baltic Sea) are located far away – increasing not only delivery times (to around a month) and costs, but also requiring a much larger number of ships. Nonetheless, we find that Russia is shipping crude oil to India from the Baltic Sea and Black Sea, to maintain export volumes.
On December 5 measures from the sixth and eighth package of sanctions took effect. These include a tough flat ban on importing Russian oil in the sixth, but a softer oil price cap scheme in the eighth that is designed to allow the EU to import Russian oil, but cut the Kremlin off from making any real money from the trade. A second round of the same sanctions was introduced on February 5 that targets oil products.
As bne IntelliNews has already reported, there has been significant leakage with the existing oil sanctions. Dodges like ship-to-ship transfers of oil to hide its origin are already happening, and mixing “crude cocktails”, adding Russian crude to other blends to mask its origin, has also been reported. When Iranian oil was sanctioned it started cutting “compensation deals”, where it would take the sanction-enforced prices, but cut deals with buyers who would then overpay for other non-sanctioned commodities like wheat.
Ships remain the mainstay of Russian oil exports. There have already been a number of investigations trying to work out how big the fleet is. The ghost fleet is a problem, as it blows a hole in the attempt to sanction Russia’s oil exports, but the jury remains out on how effective the embargoes are.
The size of the ghost fleet is important, as the lack of tankers will be a serious bottleneck, since without enough tankers Russia will be forced to cut production. The size of the cut varies according to different reports: the Financial Times quoted experts as saying the cut could be anything between 700,000 bpd up to 1.5mn bpd, where Macro Advisory estimates the cut will come in at about 1mn bpd.
“Russia needs more than 240 tankers to keep its current exports flowing,” Viktor Kurilov, an analyst at Rystad, told the FT.
And Russia has already announced that it will cut production by 500,000 bpd in March, leading some to speculate that the logistics bottleneck had already been making itself felt, although others believe that the Kremlin was attempting to manipulate prices.
“I think that they are just testing the waters to see what happens if they restrict production,” Chris Weafer, the founder and CEO of Macro Advisory and former head of research at multiple Moscow-based investment banks, told bne IntelliNews in a recent podcast on oil sanctions. “It’s also a warning that Russia could weaponise [oil] if things in Ukraine go badly.”
The Kremlin, shortly after announcing the production cut, clarified it would only last one month and seaborne departures of oil have not fallen in February.
Institute of International Finance (IIF)
A major factor in Russia’s seaborne exports is the legitimate use of Greek ships. An investigation done by the Institute of International Finance (IIF) that tracks the ownership of ships carrying Russian oil found that Greece is playing a leading role in shipping Russian crude.
Under the sixth package of sanctions, Greek shipping was given an exemption, as it remains an important part of the country’s economy. Greek ships accounted for 35% of Russian oil transported to Europe before the war, but that has since increased to 55%, according to the IIF. Theoretically as EU companies, Greek shipping would be included in the EU’s ban, but there have been reports that Greek shipping companies have been actively re-flagging their ships in order to dodge the ban.
More recently, as the restrictions on EU ships against carrying Russian crude are tightened, there are multiple reports of Greek shipping lines selling their older ships to Russia at hugely inflated prices. Normally tankers are retired after 20 years, but as a result of these deals the average age of tankers carrying Russian oil has been rising quickly, with reports of vessels as old as 25 years still in service.
Financial Times investigation
In December the Financial Times published the results of an investigation into the size of the ghost fleet and reported that it contained over 100 ships, based on information gathered from shipping brokers and analysts.
Energy consultancy Rystad says Russia has added 103 tankers in 2022 through purchases and the reallocation of ships servicing Iran and Venezuela – both already subject to Western oil embargoes.
When the embargo came into force in December, the EU said that any non-EU-flagged tanker that was caught breaching the oil price cap rule would face a ban from Western maritime services, but the punishment was watered down to 90 days, rather than a lifetime ban as originally proposed, because of Greek lobbying.
Trade press investigations
Several publications amongst the tanker trade press have attempted to answer the question of how big the fleet is and have come to a variety of different conclusions.
One of the problems is: do you count the ships that are conducting ship-to-ship transfers as part of the ghost fleet. Twitter has started to fill up with geolocated tankers loitering off the Greek coast that are clearly involved in transferring Russian oil to other ships as a way of erasing the origin of the oil.
“One of the problems with the oil sanctions is there is no percentage limit on mixing oil,” Weafer told bne IntelliNews. “That means once the crude is mixed with another crude it ceases to be “Russian oil” and can perfectly legally be shipped by EU vessels.”
The shipping journal TradeWinds said in an article on December 4 that an estimated 400 oil tankers have been sold to “unknown buyers or newcomers to the sector” since Russia’s invasion of Ukraine.
“The 393 sales represent 43% of the deals since the invasion on February 24 and the start of an upheaval in the oil trade that sent second-hand prices soaring and propelled tanker rates to 18-year highs, data from VesselsValue shows,” the publication reports.
The FT came to the same conclusion: “The largely anonymous tanker purchases can be tracked by the big increase in unnamed or new buyers appearing in registries. The vessels are generally 12-15 years old and would be expected to be scrapped in the next few years, said Anoop Singh, head of tanker research at Braemar,” the paper reported.
In 2022, operators linked to Russia are suspected to have purchased as many as 29 supertankers, known as VLCCs, very large crude carriers – each capable of carrying more than 2mn barrels – Braemar told the International Energy Agency (IEA) in a presentation last month. The country is likely to have also added 31 Suezmax-sized tankers capable of carrying about 1mn barrels each, and 49 Aframax tankers that can each haul about 700,000 barrels, the FT added. Many of these deals are being done by the state-owned VTB Bank, which was building up a tanker fleet even before the war started.
Russia makes the most use of Suezmax and Aframax tankers, with about 100 vessels in the Sovcomflot fleet, the state-owned Soviet-era shipping giant, before the war started. Adding VLCCs is clearly designed to facilitate ship-to-ship transfers, as none of Russia’s oil ports can accommodate them as they are too big. The number of VLCC steaming between Russia and Asia has suddenly jumped in recent months, according to reports.
Another tanker specialist Splash did a similar investigation, published on February 23, following an extensive, detailed analysis of the global merchant fleet. Splash found the shadow tanker fleet totalled 421 ships. For “dirty” tankers, which carry crude,, this comprises 150 Aframaxes, 49 Suezmaxes and 104 VLCCs, while “clean” tankers, which can carry oil productions, Splash counted five handies, 17 LR1s, three LR2s, and 93 MRs – all smaller classes of tanker.
Analysis at the publication concluded: “Russia now has access to more than enough crude tankers, but its clean fleet availability is barely enough to meet its export goals.”
This suggests that Russia may have to limit its exports of oil products but will be able to continue to export all its crude. Moreover, Splash found that the centre of gravity for trading Russian oil exports has shifted from the London-based Baltic Exchange to the United Arab Emirates (UAE).
“Dubai has become a hotbed for companies controlling shadow tankers and the sanctioning of Sun Ship Management would undoubtedly create more hurdles for Russia moving its barrels,” BRS stated in a recent tanker report as cited by Splash.
Splash’s tanker count tallies is less than the count from the website TankerTrackers.com that tweeted Russia’s ghost fleet is even bigger: 186 VLCC/ULCC's (2 new ones just this past week), 107 Suezmax, 142 Aframax, 31 Panamax and 73 Handies that can carry oil products, but was including Russia’s access to tankers from Iran and Venezuela.
Amongst the highest estimates for the size of the ghost fleet was from leading oil trader Trafigura, which told Bloomberg there are 600 tankers in the fleet, in an article published on February 3.
Of these, about 400 tankers can carry crude, or 20% of the global fleet, and have “switched” from mainstream trade to “ostensibly do Russian business,” co-head of oil trading at Trafigura Ben Luckock said in an interview on Bloomberg Television. For oil product tankers, the company sees the level at 200 tankers, or 7% of the world total.
“You had the old days of Iran and Venezuela, and there was a shadow fleet that was relatively small – it would manage the sanctioned barrels,” Luckock said. “This Russian flow is vastly different – it’s huge.”
Luckock said that one of factors that is driving these changes is that Russia is offering very hefty premiums to tanker companies that are reportedly 50% to 100% more than normal rates for crude shipments. Luckock said the premium on clean tanker rates could be as high as 400%. The latest data from the Baltic Exchange in London shows clean product tankers rates have reached $55,857 per day, surging 58% in a single day at the start of February, he added.
London-based EA Gibson Shipbrokers has counted at least 38 fuel-hauling ships that are owned by Russian registered companies but also another 100 fuel tankers have been sold to anonymous buyers outside the G7 or the European Union since the invasion of Ukraine a year ago – enough to carry all Russia’s oil products in addition to its crude exports.