Greece takes effective measures to prevent Russian oil transfers

Greece is continuing a long-running series of naval exercises in the Bay of Laconia, which have successfully forced tankers that had previously used the area for ship-to-ship transfers to divert to other locations.

Following the introduction of the G7 price cap on Russian oil, the bay became a hotspot for Russian crude transfers, some of which were compliant and some of which were not entirely above board. STS transfers are common in the industry, but they are also one of the main methods of concealing the origin of an oil cargo and thus evading sanctions. Russian shipping interests considered Laconia Bay a suitable location because it is sheltered, lies in international waters and is geographically convenient for “shadow fleet” tankers coming from loading ports on the Black Sea.

When Greece began holding naval exercises in the same area in early May, it effectively forced those activities to shift to other targets – with a perfect success rate. According to Bloomberg, STS transfers are increasingly concentrated in areas off Egypt, Malta and West Africa, indicating increased surveillance by coastal states.

The exercises in Greece have been extended until mid-September, the longest extension of this duration announced so far.

White House rejects sanctions against “shadow fleet” tankers

Since 2022, the Biden administration has been trying to balance the goal of limiting Russian oil revenues with the goal of maintaining the flow of Russian oil to the world market, hoping to ease the burden on Russian military finances while keeping energy prices at a level acceptable to the Western consumer. The US Treasury Department’s proposal to impose a “price cap” on Russia’s oil shipments was intended to maintain this balance: the $65 per barrel cap would put an upper limit on Russian oil revenues, but leave the tap open, allowing Russian crude exporters to use Western ships and suppliers if they comply with the cap, or switch to non-Western vessels if they want to sell at the full market price.

Russian interests responded first by evading enforcement, then by delinking the tanker fleet serving Russia from the G7 – thus creating a “shadow fleet” of dirty tankers flying under unknown flags and owned in unknown countries. Since the “shadow fleet” transports are carried out with tankers and insurers based outside the G7 states, this complies with the exemption of the cap on non-G7 transactions. For coastal states (like Greece) this means a new price in the form of risk: these tankers are older than the global average and operate in a barely regulated, questionably insured gray area.

According to the New York Times, some Treasury officials have now realized that in order to enforce the G7 price cap, it will be necessary to force Russia to resume using G7 tankers and shipping services – by sanctioning the Russian shadow fleet out of existence. The Treasury has already begun this process with about 20 tankers linked to Russia, forcing the affected vessels to anchor, but so far this has not led to an increase in oil prices.

There are about 100 more ships on the Treasury Department’s priority list, and the department believes that if they were all shut down, Russia would go back to using G7 tankers – and would then have to sell its oil at the G7-approved price of $65. The oil would still be delivered to buyers, global supplies would stay the same, global oil prices would stay the same, and Russia would earn slightly less on its energy sales, so the argument goes.

But the White House is not interested in approving further sanctions on tankers, fearing the risk of a global surge in oil prices – especially because 2024 is an election year and gasoline prices play a key role in voter sentiment, officials told the Times.

“White House economic advisers fear that could lead to a surge in oil prices this summer and a rise in U.S. gasoline prices, which could hurt Biden’s re-election campaign,” the Times reported.