A month into these sanctions, while they have disrupted the supply of Russian oil, they haven’t stopped it. We’ve seen workarounds, including an increase in deceptive shipping practices and the establishment of new ship-to-ship transfer zones to facilitate deliveries to ports in India and China. We’ve also seen UK and EU sanctioned tonnage trade interrupted.
Given geopolitical developments in the Middle East, are fresh disruptions expected around the Red Sea area?
Oil flows in the Red Sea have remained largely uninterrupted since the Houthis declared they will only target Israeli-owned vessels. Northbound transits of refined products to Europe have dropped the most, given their Western ties, while Russian flows southbound to India and China remain unaffected. At this point, we haven’t seen any material changes, and the increasing uncertainty in the region suggests that we’re still at least three or four months away from anyone making a decisive move to re-enter the area with confidence.
How would ‘maximum pressure’ US sanctions on Iran impact ‘Dark Fleet’ oil flows?
Right now, Iranian exports are at about 1.7 million b/d, with most of that heading to China. At the peak of the previous maximum pressure campaign, exports dropped to around 700, 000–800, 000 b/d. The issue is that visibility into these flows is becoming increasingly opaque. Either the National Iranian Tanker Company fleet or the dark fleet is responsible for these shipments, and they operate completely outside standard international regulatory scrutiny, so enforcing maritime rules is nearly impossible. Sanctions are pushing these ships to the fringes of the maritime industry. Their continued operation depends largely on China’s willingness to receive them and we’re still seeing consistent arrivals of Iranian barrels into China, meaning the sanctions have yet to significantly disrupt these flows.