U.S. Sanctions threaten to cripple Russia's oil exports as India and China seek alternatives
The latest round of U.S. sanctions could effectively halve Russian oil exports, as key buyers India and China seek alternative suppliers.
Russia's oil industry finds itself in dire straits following the introduction of new U.S. sanctions that have intensified restrictions on the transport and sale of Russian oil. As Bloomberg reports, tankers initially destined for Russian cargo are now turning back at sea, with major customers like China and India beginning to source from other suppliers in the Middle East. Several vessels have already stopped their journeys, while others are steering away from Russian ports where they were slated to collect shipments.
These sanctions have effectively idled more than 100 vessels capable of carrying approximately 1.4 million barrels of oil daily. That's nearly half of all Russian seaborne crude exports. Macquarie Group analysts foresee potentially even more severe ramifications, with exports potentially dipping to 2.15 million barrels per day. Three sanctioned tankers destined for the Baltic Sea reversed course near Europe's western coastline.
The logistical nightmare intensifies as sanctioned tankers begin refusing voyages. At least five vessels have rerouted, including oil carriers Atlas, Heng Tai, and Venture, turning back from European coasts toward the Mediterranean. With 81% of Russian seaborne exports bound for China and India, both nations are taking increasing steps to comply with U.S. sanctions. New Delhi has stated that sanctioned tankers can deliver cargo only until March 12, after which their access will be blocked.
Russia seeks to make up for these setbacks using a shadow fleet of older tankers operating without known owners or insurers. However, recent sanctions have nearly doubled the number of restricted vessels, hiking that number to 265. Circumventing sanctions has thus become increasingly complicated and costly.
The strain in the oil market has already pushed up Brent crude prices by $5 a barrel. Middle Eastern countries, including Saudi Arabia and Iraq, are seeing a surge in oil requests from China and India. Yet, their capacity is curtailed by commitments to OPEC+, where Russia plays a pivotal role.
The situation for Russia is worsening, as oil—a cornerstone of its national budget—turns into a vulnerability for the Kremlin. Analysts caution that ongoing pressure on the oil sector might further diminish revenues, exacerbating Russia's economic crisis.