Ships in Iran, Venezuela shadow trade supplied Russian oil to India

Supplies of Russian oil to India are arriving on vessels that were earlier used to ply crude oil produced by Iran and Venezuela, both of which have been under US sanctions for years

What’s common among Snow Lotus, Turaco, Eternal Peace, Thalia 111, and Limo?  These are among the 90 or so oil tankers, which transported Russian oil to India in the past few years but were previously involved in the Iranian/Venezuelan shadow trade in sanctioned crude shipments.

This batch of vessels, which has earned sobriquets of “ghost fleet” and “dark fleet”, came handy as Asian countries led by India and China sought alternate ways to secure discounted Russian oil as the US sanctions on Moscow intensified, according to ship tracking agencies and industry sources. That doesn’t necessarily mean that these tankers were named and sanctioned by Washington, but they were involved in transporting oil from Venezuela and Iran, said Armen Azizian, a senior oil risk analyst with London-based market intelligence agency Vortexa.

A ban on Iranian oil exports, instituted by former President Donald Trump, still holds while the ban on Venezuelan crude exports was lifted in October for a six-month period ending 18th April. Of the 493 tankers that docked at Indian ports to discharge Russian crude since January 2021, 18 per cent have previously been involved in Iranian/Venezuelan oil trade, Azizian, who authored a report reviewing the impact of sanctions on Russian oil flows in Asia, said. Not only India but many Asian nations import Russian crude utilising these tankers, replacing tonnage from any loss of vessels from recent sanctions. 29 per cent of the tankers that discharged at Chinese ports in the last three years had shipped crude from Iran and Venezuela. 

US Treasury department officials said in Delhi on Thursday that Washington “began and have continued to publicly sanction vessels involved in oil trade above the price cap (of $60/barrel).”“Our efforts are bolstered by international support for these enforcement actions, like the recent decision from private and publicly owned refineries to halt imports on Sovcomflot ships,” they said.

India’s oil ministry did not reply to an email nor did Indian Oil, the biggest buyer of Russian oil, and which was impacted the most from recent US sanction enforcement actions. Indian Oil is now in talks to renew a 490,000 barrels per day term contract, 10 per cent of India’s crude imports, with Russian state-owned oil company Rosneft.

 

India gets oil from Russia in 45 to 50 tankers every month, and the US has sanctioned less than 10 per cent of the 600-plus strong dark fleet carrying Russian oil to global importing nations, an Indian refining official said.
 

That still leaves a large non-sanctioned fleet operational. There are several tankers, typically over 10 years old and specialising in opaque shipments, available to transport Russian oil to India, the official remarked.

Oil secretary Pankaj Jain is very clear that India will not allow trades in sanctioned vessels. The country will buy Russian oil only if it is delivered on non-sanctioned ships, he said. India is more risk-averse than China but a large opaque fleet suggests minimal impact to both markets from US sanctions. Shipments of Russian oil on sanctioned vessels to India declined by 300,000 bpd from a 2023 average, however, hardly 5 per cent of overall Indian purchases were affected, Vortexa data showed. 

Imports of Russian oil in March actually rose on the month to 1.65 million bpd according to data from Kpler.

 Indian refining sources said that traders selling Iranian crude, flagged as Malaysian oil, continue to approach state-run refiners but they are more wary of violating US sanctions than Beijing.

For instance, many of the Sokol cargoes that were turned away by India since December have found a home in China, and 40 per cent of those cargoes were delivered on sanctioned vessels.

But Washington is now turning its sights on Iran, with at least six ships flying the Panamanian flag and carrying Iranian oil since January facing sanctions.

Last month, American officials visited Panama — whose flag flies on 8,540 vessels, representing 16 per cent of the ships that make up the world fleet — asking local authorities to stop tankers flying its flag from transporting Iranian crude. In January, Washington asked the Panama Maritime Authority to investigate 189 Panamanian-flagged vessels, accounting for around half of Iran’s shadow fleet, US-based market information provider Energy Intelligence reported. 

Despite US sanction enforcement actions, Iran increased crude exports by 40 per cent last year to 1.4 million bpd on over 250 tankers, according to Vortexa. Small, independent refiners in China termed as teapots are the main buyers of sanctioned crudes. 

Iranian crude is reported to be handed over via ship-to-ship transfers offshore Malaysia before being designated as Malaysian oil. China imported 1.1 million bpd of Malaysian-origin crude in 2023, according to customs data, up 70 per cent from 2022, the Energy Intelligence reported.