How gray schemes work with suspicious tankers — explains oil and gas analyst Mikhail Krutikhin
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— There is a so-called shadow fleet of tankers and other vessels in the world. Before the story of Russian sanctions, such vessels transported oil from Iran and Venezuela, disguising it as oil from other countries. Iranian, for example, was transported like Malaysian and, in my opinion, is still transported. These are ships owned by companies that are not particularly picky, to put it mildly.
When sanctions began and there were restrictions on the sea transportation of Russian oil, Russia took action. First, the oil companies themselves began to acquire tankers for themselves. More precisely, not the companies themselves, but their divisions that are engaged in trade, that is, traders. And, for example,
the state-owned company Sovcomflot registered its company in the United Arab Emirates and actually transferred all of its, if I am not mistaken, 95 vessels to the jurisdiction of the UAE. And they began to transport Russian oil, and they transport it on unclear commercial terms.
— How is that?
— Since there is a ceiling on the price of Russian oil, a company that provides transportation services must confirm that it is transporting oil at a price below $60 per barrel. And these companies allow you to hide the real price of oil.
— What does it mean to hide the real price of oil? Who will buy it at a price above the «ceiling» if the buyer can now refer to the ceiling and bring down the price?
— There is a trick here. When the Russian government quotes the price of Russian oil, it uses the valuation given for Russian oil by companies such as Argus, for example. It calculates the price like this. They take the FOB (Free on Board) price — what is shipped in the Russian port. After that, they calculate how much freight will cost — transportation with insurance — to European ports. That is, to those ports where this oil should not go because of the embargo, but they still calculate these routes — to the port of Augusta in the Mediterranean Sea or to Rotterdam. And it turns out they have somewhere 55 dollars per barrel. It's below the ceiling. Based on this assessment, the Russian government charges all sorts of taxes.
But Russian oil does not go to Augusta and Rotterdam. It goes around the whole of Europe, then through the Suez Canal, for example, to India. And carrier companies wind up their money. This money no longer enters the Russian budget, that is, they do not feed [the special operation]. It is the same with insurance companies: this money also does not go to the Russian budget. There are some port margins and so on.
As a result, it turns out that the price of Russian oil in India is more than $70 per barrel.
It is difficult for buyers to make payments because Western banks refuse to service such transactions due to the fact that the final price is already above the “ceiling”. But there are banks that still do it. In addition, Indians are beginning to pay in rupees, and sometimes even in rubles. These are also tricks to get around the ceiling.
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— So this ceiling of $60 is set for the final price, already taking into account transportation, insurance and everything else?
— And this is not mentioned anywhere. In the texts that prescribe sanctions, this is simply not the case. Therefore, the Russian government shows: you see, our price is below the ceiling. That is, they, of course, do not directly admit that they comply with the ceiling, but show a price that is lower than it. The one called Argus. And everything that is wound up from above does not go to the Russian budget.
Moreover, the US administration turned to the world's largest oil trading companies, such as Vitol, Trafigura and others, offering them to more actively transport Russian oil, provided that its price does not exceed the «ceiling». In order not to create a shortage of oil on the world market.
And it is already clear that even under this scheme, Russian oil is sold, it is bought, but the Russian budget receives half the money from its sale than before the sanctions.
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— So the sanctions work in this part?
— Yes, sanctions work, they have played their role here.
— Why do buyers agree on a price including transportation, if it is above the “ceiling”? They have no way to bargain big discounts with Russia?
— It still turns out cheaper than buying Brent oil or something else. Although there are suspicions about collusion between Indian buyers and Russian sellers. Perhaps there are also corrupt schemes in which buyers actually pay cheaper, but show such a price.
— When Bloomberg reports that Russia trades oil at a price above the «ceiling», he means the cost including transportation and other markups?
— Huge confusion with prices arises when Argus or Bloomberg start mixing Russian oil in publications Urals, which should be sold at a price below $60, with Russian deliveries to China.
But a completely different oil goes to China from Russia, it is better in quality and more expensive than Urals, there may be $ 82 per barrel.
It goes through the Eastern Siberia-Pacific Ocean (ESPO) pipeline. The variety is called ESPO, after the name of the pipe. There is also oil that is produced on Sakhalin, it is called Sokol. It is also more expensive, because the quality is very good. And analysts in their reports mix these high prices with the price of Urals, as a result, the price is above the «ceiling».
Oil that comes from Russia through pipelines is not subject to restrictions. Although Russian oil is now “toxic” and under sanctions, the Chinese still began to demand discounts on it as well. But still, one should not confuse the oil coming from the ports in the Baltic and the Black Sea with the one that is sent by pipe to China or by pipe to the Pacific Ocean, so that it is shipped from the port of Kozmino not only to China, but also to Japan. It's just two different worlds. In addition, part of the oil goes to China through the pipeline simply for free, because Rosneft pays with oil against the money that it has already received. And Bloomberg made a vinaigrette out of them in the latest publication.
— How many tankers with gray oil go? And how much can they carry?
— There are different estimates. According to some estimates, there are six hundred tankers, according to others — two hundred, according to the third — only eleven.
— Wow variation.
“The most reasonable estimate is four hundred tankers. The Splash agency tried to count them, counted 441 pieces, counted how many large and small there are, Aframax, Suezmax class, there are approximate figures. There are different tankers, big and small, new and old.
— I read that this is some kind of terrible junk, on which it is dangerous to carry oil. Is this true?
—There have been such warnings that most of these tankers have reached the end of their service life, that they are dangerous from an environmental point of view.
But when we look at what ships leave Russian western ports, we see only one at the age of 25, the rest are younger. Therefore, I do not think that this is such a big danger.
— Where did Russia get these tankers in such a quantity at once — and so as not to be junk?
— Such tankers are sold in the world, in principle this is not a problem. But indeed, for some time they were in high demand from Russian and pro-Russian companies. Because Russian officials register a company outside of Russia, buy several tankers and transport oil, cashing in on the fact that money for transportation is not returned to the Russian budget. Moreover, sometimes these officials buy such vessels for state money at a high price.
— So, the recent news that some companies registered in India are massively buying up tankers, is that what it is? It turns out that sanctions turned out to be very beneficial for some Russian individuals?
— Certainly. For those who profit from the transportation of Russian sanctioned oil, they are very profitable. And this is beneficial for oil companies, because they are not the ones who sell oil. They hand over oil to their «daughter», registered abroad, and she is already making money. Rosneft, Lukoil, and others have such subsidiaries.
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— If Indians buy oil for rupees, then how are these rupees converted in rubles? Or where do companies put their rupees?
— An Indian bank has a foreign currency account with the Russian Central Bank, and the Russian Central Bank has an account in India. These are special exchange accounts. There are, in addition, several banks that deal specifically with the conversion and maintenance of such accounts. But this is really a problem, because when rupees enter Russia, there is nothing to buy with them. This problem has already been fixed.
— I am asking this because India does not have such goods that she can pay for oil by barter.
— And some deals are limited to this too.
— How do these gray transportations even happen? Here the ship left, say, from Ust-Luga…
Some transactions are more or less open. There is, for example, information about two points in the Mediterranean Sea where reloading from tankers to tankers takes place: near the coast of Greece and on the traverse of Ceuta, this is a Spanish exclave on the Moroccan coast of the Mediterranean Sea. Near Ceuta are three giant tankers chartered by large Chinese companies, they hold two million barrels of oil. They are approached by shuttle tankers from Novorossiysk — of various affiliations, including Russian ones. They dump oil into these huge tankers. And it seems that the Chinese bought Russian oil very cheaply, at the same FOB price.
Then they fill these tankers with oil from various sources and carry it as their own, Chinese, in order to sell it somewhere at the world price.< /p>
It is difficult to say how many such shipments there are, I know of three tankers near Ceuta and one or two near the Greek coast.
— And is it profitable, despite such difficulties?
There is another problem here. If a tanker transported Russian oil somewhere, made a long journey, then it goes back empty. And this should also be taken into account.
— Here's how to take this into account? The journey to India is four months. And back empty?
“Someone has to charter it back. It enters, for example, the Persian Gulf, fills with oil from the Arabs, and then carries Arab oil somewhere. But there is a problem. Since these tankers are generally suspicious, some of them remain empty, and their return trip is empty.
But Russian companies are ready to sell their oil for at least two kopecks. That is below cost. It is now believed that the cost of Russian oil is $50 per barrel. And there were cases when it was shipped from the port for 37 dollars. This, of course, is already at a loss for companies. But otherwise, the wells would have to be closed, the fields would have to be stopped. In addition to the fact that people would have to be left without work and entire villages would have to be closed, it is also necessary to invest a lot of money in the conservation of wells.
And this is completely unprofitable, if the well is closed, then then restoring production is very expensive. This would mean the gradual dying of the industry.
Therefore, they try to maintain prey. There are two ways. The first is to send as much oil as possible for export, the second is not to return part of the money received for oil to Russia, this is a fundamental strategic decision of Russian oil companies.
— Companies? After all, Vladimir Vladimirovich ordered everything to the house, everything to the house …
— They don't give a damn. Someone else will tell you about the Department of Energy. Bureaucracies do not manage oil companies; they cannot regulate production, processing, and exports. Companies do all this themselves, focusing on the market.
— Why such a huge cost price — $ 50 per barrel? Is she even real?
— This is who thinks. It is not clear what is included in it — what taxes, excises and what else, delivery in Russia, «corruption tax» — officials need to roll back something. Once published data about 18 dollars, Rosneft boasted that it had a cost of two and a half dollars. But it was about the so-called cost lifting — operating costs at the well. All the money has already been invested in the development of the field, all capital expenditures have been repaid, fifteen years have already passed, there is already a net profit, and then the lifting of the cost may be two dollars per barrel, or it may be 10 dollars. But taking into account taxes and other things, it turns out to be about $50 per barrel. And the West agrees with this assessment.
— Why does the West not interfere with such schemes?
— What for? Business is on. The main goal was to deprive the Russian budget of revenues from oil exports. And by 46% in January, by 46% in February, oil and gas revenues to the Russian budget decreased, these are data published by the Ministry of Finance.
This means that in general the Russian budget lost 36%, that is, a third of the budget was lost . This is the very goal that was set, and it has been achieved.
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— What happens in Europe after Russian oil officially stopped going there?
< p>— Other oil went there. There were cases of some transshipments, I know that Russian oil somehow got into Italy, but such things are difficult to record. In general, Europe receives oil from other sources — from the United States, from the Persian Gulf, from Africa. The global oil trade continues, it's just that more Russian oil went towards India.
— The Russian government is trying to somehow compensate for the loss of oil and gas revenues through taxes. What does this mean for mining companies?
— Here, in particular, they came up with a new tax for Gazprom for 2023-2025, it pays an additional 50 billion rubles every month. They also thought of collecting voluntary donations from large companies, starting with oil companies.
—But they did not want to pay voluntarily.
—Yes, they rebelled.< /p>
They said: sorry, but as soon as it is written that this is a voluntary donation, it means that we are financing [a special operation], it means that our wives, children and other relatives will feel bad, our bank accounts abroad will end, sanctions will be against us personally.< /p>
Therefore, the representatives of the companies said, you must adopt some amendments to the Tax Code, introduce a new tax — we agree to pay.
In addition, there is a sale of gold reserves in Russia. There is a sale of yuan, they are not subject to sanctions, therefore, in agreement with the Chinese, yuan can be sold. I also think they will print money. All this will affect the exchange rate of the ruble. And if they get not 70 rubles, but 200 rubles per dollar, then the budget problems will be partly solved.
— Can Russia refine more oil domestically by reducing exports?
— And here the factor is at work that since February 5, there has been an embargo on the purchase of Russian oil products as well. The main oil products in Russia are diesel fuel, which was in demand abroad, and if it is cheaper, it is fuel oil and straight-run gasoline, naphtha. Naphtha is a semi-finished product, a raw material for the petrochemical industry. Of this, only 60-70% went to those countries that declared an embargo. So it needs to be attached somewhere. Something was sent to the United Arab Emirates, some fuel oil was bought by Saudi Arabia for its power plants.
China and India do not need all this, they themselves are exporters of oil products. Part of the production at oil refineries will have to be reduced. Therefore, oil companies that cannot attach their oil to Russian refineries, and seek to push all of it abroad.
—But do Russian companies also have their own refineries abroad?
— Not everyone. Rosneft has stakes in several refineries in India, they produce products for domestic use. Until recently, they sent not only Russian oil, but also Venezuelan oil there. Until recently, Rosneft had refineries in Germany, but now all this has been taken away from them. Lukoil has an oil refinery in Sicily and in Bulgaria, in Burgas, where oil continues to flow. That is, the oil that goes to Italy is sent by Lukoil to itself, according to its own schemes. But in Italy, they seem to want to sell the plant, everything is also unclear with Bulgaria.
— You once said that Iran would prevent such schemes for selling Russian oil, because it would become his competitor. How does he look at this trade now?
—There is competition there, but now Iran is selling the same volumes.
Here, rather, another thing needs to be looked at: why did the countries of the Persian Gulf suddenly agree that Russian suppliers pressed them in India?
—So they apparently took Europe for themselves?
— Yes, they simply moved to the European markets, from which they kicked out Russian oil. In order not to disturb the stability in the oil market, they agreed to such a geographical movement, this was agreed with Russia, these were peace agreements.
— How long can these gray transportations continue?< /p>
— I think that the initiators of the sanctions will now begin to gradually tighten the screws. Apparently, by the end of March, a new price ceiling will be introduced, it will have a very strong impact on the whole picture. In addition, I do not rule out that secondary sanctions will be introduced against those who buy Russian oil at an excessively high price.
So far, sanctions do not apply to buyers, as long as they concern only those who provide sea transportation of Russian oil . Such a tightening, I think, will be.