Russia has become more dependent on trade through the Suez
Canal and the Red Sea since it invaded Ukraine, which led to Europe imposing
sanctions on Russian imports and forced Moscow to export most of its crude to
China and India. Before the war, Russia exported more to Europe.
The number of Russian ships passing through the Red Sea has
registered a slight decline since December, according to oil analytics firm
Vortexa, but traffic last week was still around 20% higher than on average in
2023.
That contrasted to more extensive disruptions overall to oil
tanker sailings through the Red Sea in the past two weeks.
Shipments of diesel and jet fuel from the Middle East and
Asia to Europe – one of the major east-to-west oil trade routes – nearly came
to a halt in the days following the first round of U.S.-led retaliatory strikes
on Yemen on Jan. 11, Vortexa data show.
Russia has close ties to Iran, which backs the Houthis, and
that may have helped prevent attacks.
Ships carrying Russian oil for the most part have no links
to Israel, the United States or Britain. The Houthis have said they are
targeting ships connected to those countries in attacks to show solidarity with
Palestinians in Gaza.
G7 sanctions on Russia's oil trade over the Ukraine war
contributed to rapid growth in the shadow fleet of vessels transporting
sanctioned crude and fuel. Those vessels are leased by companies typically
registered outside countries that have imposed sanctions on Russia. They also
use maritime services and insurance from countries that do not impose
sanctions.
With fewer clear connections to Western companies, those
vessels are less likely to be a target.
"Most Russian crude and fuel is transported by the
shadow fleet, so its unlikely going to be in the crosshairs of Houthi
attacks," said veteran oil trader Adi Imsirovic.
"The Houthis are targeting ships linked to certain
countries."
Many vessels carrying Russian cargoes are indicating they
are not tied to Israel via signals from automatic identification systems (AIS)
- which publicly broadcast information including a vessel's position and
destination, Vortexa analyst Mary Melton said.
Russia, a partner to key Arab powers like Saudi Arabia and
the United Arab Emirates in addition to its ties with Iran, has condemned what
it called the 'irresponsible' strikes.
Chinese officials have put pressure on Iran to rein in
attacks on ships in the Red Sea and ensure those attacks do not hurt Chinese
interests, Iranian sources and a diplomat told Reuters last week.
ATTACK
A Houthi attack late last week on a tanker carrying fuel
which originally loaded in Russia was unlikely to impact wider Russian trade
flows as that specific vessel was targeted because it had ties to British and
American companies, Vortexa's Melton said.
"The tanker had ties to both US and UK based corporate
entities, so other vessels carrying Russian cargoes without these ties do not
face a similar risk," she said.
The attacked tanker Marlin Luanda is owned by Oceonix
Services, a company registered in the UK to a London address, according to data
from another tracking firm Kpler.
Global commodities trader Trafigura, which owned the cargo,
said it was assessing the security risks of further Red Sea voyages.
Four tankers carrying Russian Urals crude passed through the
Bab-el-Mandab strait with another three heading south through the Red Sea since
the attack on the Trafigura vessel on Jan. 26, Kpler data show.
The flow of Russian oil should continue provided it makes
economic sense and insurance cover can be procured given the level of demand
from India and China, Ian Wilkinson, VP of sales excellence at Inchcape
Shipping Services told Reuters.
Western tankers, however, will likely re-route away from the
Red Sea and sail around the Cape of Good Hope, said Shefali Shokeen, a lead
shipping analyst with a Dubai-based shipowner.
Either way, shippers are facing higher costs. In the Red
Sea, shipowners are charging higher freight rates and crew fees, and war risk
insurance premiums have surged.
Crew fees have doubled, while war risk premiums now amount
to around 1% of the value of a ship, versus 0.5% about 10 days ago, excluding
discounts, according to industry sources.
For instance, costs to charter 1 million barrel-capacity
Suezmax ships to send Iraqi oil to Mediterranean refineries have climbed by
$2.50-$3.50 a barrel for freight, while insurance has roughly tripled to
between 10 and 15 cents a barrel, according to a trader with a European
refiner.
The alternative route via the Cape of Good Hope adds two to
three weeks to sailing time and an extra 3,300 nautical miles in fuel
consumption, in addition to emissions taxes for those owned by or calling at EU
states.
Reuters
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