Russian oil export revenues decreased marginally to $15.7 billion due to lower export volumes despite higher oil prices in February 2024, according to the March ‘Russian Oil Tracker’ by KSE Institute. The persistent activity of the shadow fleet, despite targeted measures by the US Treasury, has enabled Russia to maintain substantial oil exports and surpass the oil price cap.

In February, Russian seaborne oil exports decreased by 3%, while Urals FOB prices in the Baltic and Black Sea increased by $4/barrel to $66/barrel. The average oil price cap was breached as only 35% of Russian oil exports were transported by IG-insured tankers, indicating weak reliance on Western maritime services. 

The discounts of Urals DAP WCI and ESPO FOB Kozmino to Dubai M1 were recorded at only $1.0/bbl and $4.35/bbl respectively in February 2024. The target of keeping Russian oil floating to non-EU/G7 markets but leaving Russia without windfall oil revenues by projecting large discounts on Russian oil exports at these markets has not been hit yet. 

Russia heavily relies on its shadow fleet for oil exports. In February, 225 loaded non-IG-insured tankers departed from ports, with 2 engaged in Ship-to-Ship (STS) transfers. Concerningly, 84% of these tankers were over 15 years old, posing significant environmental risks for the EU. The shadow fleet exported ~2.4 million barrels per day (mb/d) of crude and 1.4 mb/d of oil products.

In February 2024, Russia actively utilized STS transfers for its oil exports to bypass price caps, involving over 69 unique tankers. Notably, 5 IG-insured tankers from this group could carry Russian oil exports sold above the price cap, as they were loaded from tankers that navigated without IG P&I insurance coverage.

The US Treasury approach to designate individual vessels effectively hits the target by removing shadow tankers from regular commercial service. As of March 20, 2024, the US Treasury’s vessel designation approach successfully targets shadow tankers, with 29 out of 41 sanctioned vessels unloaded and not scheduled for voyages, 7 loaded but inactive, and 5 completing voyages.

While the US Treasury has targeted individual vessels, Russia continues to seek ways to circumvent OFAC sanctions. For example, Russia is actively transferring oil tankers from sanctioned Scf Mgmt Fzco to other UAE companies like Fornax Ship Management and Stream Ship Management Fzco. Meanwhile, UAE-registered companies quickly replaced sanctioned Sovcomflot’s shipments to India after Indian refineries halted operations with them.

As for crude oil export destinations, China became the biggest Russian seaborne crude importer, as India decreased its imports by 23%. Altogether India, China and Turkey were responsible for 87% of Russian crude oil exports in February. Turkey also topped oil product imports, increasing its reliance on Russian oil to ~70% of its energy demand.

However, India and Turkey have not only retained Russian oil for domestic consumption but have also processed it, exporting refined oil products to EU/G7 countries. This is evidenced by a significant increase in premium oil product exports from India and Turkey to the EU/G7, which were 2.8 and 2.3 times higher, respectively, compared to April 2022. 

In February 2024, the volume of Russian oil on water was estimated at record 132 mb or 2.7 times higher than the pre-invasion average indicating logistical challenges of rerouting oil to new markets.The volumes of Russian crude and diesel on water were ~3.6 and 4.0 times higher respectively vs. January 2022.

Meanwhile, UAE and Greek ship managers have also played a significant role in transporting Russian crude oil above the oil price cap. Notably, Scf Mgmt Fzc maintained its top position for the third consecutive month, while Greek companies accounted for a substantial share of crude oil exporters and oil product shippers in February.

KSE Institute projects Russian oil revenues to contract to $163 bn and $143 bn in 2024 and 2025 under the base case with current oil price caps and stronger sanctions enforcement. However, if sanctions enforcement is weak, Russian oil revenues could increase, reaching $194 bn in 2024 and $186 bn in 2025.