EU Sanctions May Put a $16B Hole in Russia's Tanker Fleet

Russia may have to expand its own tanker fleet and attract more tonnage from non-western owners in order to keep moving oil after upcoming EU sanctions - and the details suggest that it will be costly. 

In a market report released Friday, shipbroker Gibson said that it expects that more than 200 tankers may have to exit Russian trades before December 5, when the EU's Russian oil shipping ban (or, if revised, a "price cap") goes into effect. "It is reasonable to assume that there might be  insufficient tonnage to transport Russian oil to market, particularly given that those barrels currently traded to Europe will have to be redirected longer haul," predicted Gibson.

If the Russian fleet is undersupplied after the departure of western tonnage, sale & purchase deals could rebalance the trade by transferring more ships to parties willing and able to work with Russia. This may already be happening: Gibson counts roughly 100 Aframax and Suezmax sales this year to buyers who would not be affected by EU restrictions, and 40 more VLCC sales. 

This ownership shift may be visible in the ice-class tanker fleet, where vessels have changed hands at a rapid clip this year. About four million dwt worth of ice class tanker tonnage - more than 40 ships - were sold over the summer, a Gibson broker told Bloomberg last month. This winter, these vessels will be needed to get Russian oil out of the Baltic from the busy terminals near St. Petersburg. 

As it stands today, tanker broker Braemar believes that Russia will come up short by about 70 Aframaxes and 35 Suezmaxes. Filling that gap may be costly, the head of Russia's second-largest bank said last week. 

"According to our estimates, only the tanker fleet expansion may require at least [$16 billion] in the near time. Amid the absence of external financing and limited financial flows of the companies, the role of banks in attraction of required investments will only increase,” said VTB chairman Andrey Kostin, according to Piter.TV and PortNews.