A significant setback has hit Russia’s oil exports as 14 tankers, laden with 10 million barrels of Sokol grade crude, find themselves stranded off the coast of South Korea. The impasse is attributed to US sanctions and payment complications, creating a substantial hurdle for Moscow and causing disruptions in its oil trade.
Plight of the Stranded Tankers
The vessels, comprising 11 Aframax tankers and three very large crude carriers (VLCCs), are currently anchored near South Korea’s port of Yosu. The volumes they carry, equivalent to 1.3 million metric tons, represent over a month’s production from the Sakhalin-1 project, once a flagship venture of US major Exxon Mobil. The project faced production challenges after Exxon Mobil’s exit from Russia in 2022 following Moscow’s invasion of Ukraine.
Sakhalin-1, operating under a production sharing agreement, has struggled to regain its former output levels post the departure of Exxon Mobil, and the stranded tankers add to the woes by presenting a significant obstacle to Russian oil exports.
Impact of US Sanctions
In the preceding year, the United States imposed sanctions on vessels and companies associated with transporting Sokol crude. The repercussions of these sanctions are evident as the stranded tankers encounter difficulties in securing buyers. Washington clarified that the sanctions aim to curtail revenues for President Vladimir Putin and the Russian military in Ukraine while attempting to avoid disruption in global energy markets.
Stored Oil and Delayed Shipments
The volumes stranded on these tankers represent 45 days of production from Sakhalin-1, a project with a typical output of around 220,000 barrels per day (bpd). Notable very large crude carriers (VLCCs) like La Balena, Nireta, and Nellis are serving as floating storage for the Russian Sokol oil grade.
Apart from the sanctions, payment issues have further complicated matters, leading to delays in Sokol oil shipments to the Indian Oil Corp (IOC). This has forced India’s largest refiner to tap into inventories and seek additional oil from the Middle East. Disagreements over the currency used for payment have exacerbated the challenges in the oil trade between Russia and India.
Neither the Indian Oil Corp (IOC) nor Rosneft, the Russian oil major, responded to Reuters’ requests for comments on the situation.
