US Sanctions Drive Surge in Russian Oil Freight Costs

Recent U.S. sanctions against Russia's oil industry have led to a significant increase in freight rates for transporting Russian oil, with costs rising by 25% for shipments from western ports to India and more than threefold for deliveries to China. The sanctions specifically targeted 183 vessels, including those in a 'shadow fleet' evading previous restrictions, as well as insurance providers linked to Russian shipping. As a result, the cost of a one-way trip for Aframax vessels from the Baltic to India has jumped to approximately $6.0-6.3 million. Traders predict that these sanctions will further inflate shipping costs and may force Russian oil exporters to reduce prices below the $60 per barrel cap established by the West to utilize Western shipping services. Additionally, the sanctions have disrupted the transportation of ESPO and Sokol-grade oil near China, complicating logistics for Chinese refineries that prefer these grades. The ongoing sanctions are expected to create a significant shortage of tankers available for Russian oil exports, potentially impacting its overall export capabilities.