Putin has won the oil war

The oil price cap against Moscow has failed resoundingly: the Kremlin is now earning more from oil sales than before the invasion of Ukraine - and is thus financing its war of aggression without restraint. The West needs new sanctions if it wants to defeat Russia.

The tanker "Turba", which lay off the Greek coast in September, is unusual in international shipping in several respects. Not only is the rusty barge flying the flag of Cameroon 26 years old, making it one of the oldest merchant ships on the world's oceans. It also has a very special ability: to disappear at the touch of a button. At least from where a team from the financial agency "Bloomberg" was able to see the almost 250-metre-long ship with their own eyes that day: Side by side with the equally ageing tanker "Simba", which was pumping Russian oil into the "Turba" under the watchful eyes of the Greek coast guard.

Meanwhile, in digital tracking systems, the "Turba" appeared somewhere else entirely: miles away from the secret loading process. This is known as spoofing, the faking of position signals in order to conceal the true route. And not just the "Simba" and the "Turba", according to Bloomberg, more than a dozen tankers were in the Laconia Gulf that day in September. And they were doing the same thing: secretly transferring oil on the high seas. They are the clearest proof that the Western sanctions against the Kremlin are not working.

Russia has been at war with Ukraine for almost two years now. And for just as long, the West has been trying to dry up the Putin regime's sources of money in order to deprive the Russian terrorist attacks on Ukrainian cities of their financial basis. A year ago, the G7 states, the EU and Australia therefore decided to cap the price of Russian oil at a maximum of 60 dollars. It is now clear that the goal of cutting off the warlord in the Kremlin's money supply has been missed. Russia's oil revenues continue to gush unchecked. If the West wants to turn the tide on the battlefield, it not only needs to think about supplying more weapons to Kiev. It also needs a new sanctions strategy.

Shadow fleet sailing around the world

According to Bloomberg, almost half of all Russian oil exports this year were transported via shadow shipments. The trading giants such as Glencore, Vitol and Trafigura, which moved the majority of Russian oil before Putin's invasion, have long since been replaced by an armada of smaller and more opaque transporters with unclear owners, who now sail the world's oceans with poorly insured, ancient tankers as a permanent accident risk. "The whole thing is just disappearing underground," the financial agency quotes a former British Gazprom oil manager. "And we don't know who's doing what and how, and where it's going."

According to Bloomberg estimates, up to eleven billion dollars find their way back to Russia via winding routes from the illegal oil business thanks to tankers such as "Simba" and their questionable backers from Hong Kong via Dubai and the Seychelles to the Marshall Islands. As off the Greek coast, the same game routinely takes place in the Sea of Japan off the Chinese coast - where tankers also conceal their positions when they secretly pick up the black gold in Russian oil ports or tranship it on the high seas to take it to the People's Republic, for example.

But it is not only with his fleet of rusty ghost ships that Putin is successfully undermining the West's sanctions. Western diplomats admit behind closed doors that no Russian oil is actually sold for less than 60 dollars. And Moscow's officials are openly thumbing their noses at the West: "Even the unfriendly states admit that the so-called price cap has not worked," boasted an Energy Ministry official in the Duma in November. "More than 99 percent of the oil was traded well above the ceiling of 60 dollars per barrel." According to calculations by Bloomberg, Russia is now sometimes even earning more from the sale of oil than before the invasion of Ukraine.

This is due to the design flaws of the price cap. It was created to curb Moscow's oil revenues, but at the same time to prevent a price explosion on the oil market - after all, Russia is one of the largest oil-producing countries in the world and was Europe's most important oil supplier until the invasion of Ukraine. Russia is therefore no longer allowed to export its oil directly to the West.

But instead of a global embargo, a lazy compromise was agreed: a price cap that would apply worldwide - by prohibiting shipping companies from transporting Russian oil, banning traders from buying Russian oil for more than 60 dollars and preventing banks and insurers from financing or hedging oil deals above the price cap. The only problem is: even in Europe, hardly any countries strictly enforce the regulations, and there are hardly any investigations, let alone fines. And outside the West, too many shipowners, traders and insurers are not even following suit. Almost three quarters of all Russian oil exports by sea are now handled without Western insurance, the Financial Times reported in the fall.

India is the biggest beneficiary

In addition, it is not only Russia that is trying to circumvent the price cap. Third countries are also benefiting from the sanctions and are therefore openly circumventing them. The biggest free rider is undoubtedly India. Since the invasion of Ukraine, the country has acted as the most important middleman for Russian oil: Companies on the subcontinent buy it up, process it into petrol, diesel or kerosene - and deliver it to the West. According to a report by Politico, India's oil imports from Russia have doubled this year. Almost half of all Russian shiploads now go to the country.

Apart from political appeals, Western governments have no means of countering this. They can only effectively combat the sanction-breakers within their own ranks. One year after the introduction of the price cap, the EU therefore adopted new measures in mid-December to make enforcement of the cap more effective. Shipowners and insurers now have to complete even more paperwork. Instead of a simple declaration that the oil is traded for a maximum of 60 dollars, they now also have to declare their freight and insurance costs separately. This makes it less easy to cheat on the actual price paid.

However, this will not really prevent Putin from continuing to fill his war chest with billions in oil. This would only be possible if the West were to completely ban its traders and transporters from transporting Russian oil to the rest of the world. The key question is whether the governments in the USA and Europe are really prepared to put their voters through the associated price explosion. As with the issue of further arms supplies, only greater political will could really turn the tide. In the oil war on the world's oceans as well as on the front lines in Donbass.

Read also:

The shadow fleet of tankers transporting Russian oil continues to bypass Western sanctions, with over half of Russia's oil exports this year estimated to be through such covert shipments. This trend is evident in the Laconia Gulf, where tankers like "Simba" engage in secret oil transfers, concealing their positions through spoofing.

The Attack on Ukraine has not deterred Russia from maximizing profits from its oil sales. Despite the price cap of 60 dollars per barrel, Russia is reportedly earning more from oil sales than before the invasion, exploiting loopholes and secrecy in international shipping to navigate around Western sanctions.

Source: www.ntv.de