According to a recent Reuters report, President Joe Biden's administration plans to impose an additional “substantial package” of sanctions on Russia's shadow oil tanker fleet days before Donald Trump takes the office.
They are expected to target “two Russian oil companies, more than 100 tankers, oil traders, Russian insurance companies etc.," focusing on tankers that carry Russian oil sold above the West's $60 per barrel price cap.
The Group of Seven (G7) countries are also exploring ways to further tighten price restrictions on Russian oil. This includes considering alternatives to the current price ceiling mechanism such as a complete ban on the processing of Russian oil or lowering the price threshold from $60 to $40 per barrel. These measures are being discussed amid predictions of a global oil surplus in 2025.
Current restrictions on Russian oil include a $60 per barrel limit imposed by the G7, the European Union (EU), and Australia at the end of 2022. The mechanism works by prohibiting the use of Western maritime services for the transportation, insurance, and financing of oil priced at or above the limit. This puts buyers of Russian oil at risk of losing access to Western services if they pay more than $60 per barrel. The G7 countries and the EU have also imposed an embargo on Russian oil, except for pipeline supplies.
As a result of these sanctions, Russia has lost the European market for seaborne oil exports. However, it has shifted its focus to India and China, which have not joined the sanctions, as well as Turkey.
According to Kyiv School of Economics’ (KSE) “Russian Oil Tracker” report released last November, these countries have become the main buyers of Russian oil. The "shadow fleet" plays a critical role in facilitating these oil exports beyond the price ceiling. In October 2024, the fleet accounted for 85% of Russia's oil supplies, with India alone importing 53% of Russia's oil exports by sea. Deliveries to Turkey also increased 2.5 times to 329,000 barrels per day after the resumption of operations at the SOCAR STAR refinery.
Despite the current restrictions and sanctions, Russia's oil revenues for 2023 amounted to $183 billion. It is projected that even with current price restrictions and sanctions, these revenues could reach $193 billion in 2024 and $137 billion in 2025.
The KSE estimates that Russia has invested $10 billion in the development of its shadow fleet and also takes advantage of offers from “friendly” countries.
According to Ukraine Main Intelligence Directorate (HUR), the shadow fleet currently includes more than a thousand mostly outdated vessels that are poorly maintained, without proper insurance, with confusing ownership and management structures, located in “friendly” jurisdictions, under “convenient” flags. The total deadweight (gross tonnage - Ed.) of this segment is estimated at more than 100 million tons (approximately 17% of the world's oil tanker fleet).