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By Brendan Cole
Senior Reporter
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Tankers carrying 10 million barrels of Russian oil are stranded off the coast of South Korea, it has been reported, as sanctions hurt Moscow's ability to get payments for its main export.
Some 1.3 million metric tons of Sokol grade crude oil had been at sea for weeks due to payment disagreements that have kept buyers at bay, per Reuters. A barrel of Sokol was trading at $77 on Monday, meaning around $770 million worth of Russia's valuable export has been stuck in limbo.
The oil was 45 days' worth of production of the Sakhalin-1 project, a venture of ExxonMobil. The American multinational oil and gas corporation left Russia after Vladimir Putin's full-scale invasion of Ukraine in February 2022, and difficulties in selling Sokol-grade crude is a challenge for Moscow following the Western-imposed sanctions.
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The supertankers (very large crude carriers, or VLCCs) La Balena, Nireta and Nellis are floating storage for 3.2 million barrels of the Russian oil grade near South Korea's port of Yosu. The rest of the Sokol oil loaded between November and January is stored on smaller Aframax vessels, as importers of Russian crude are unable to settle on a currency with which to pay for the product.
In response to Western sanctions, Moscow divided the world into "friendly" and "unfriendly" countries, offering the former discounted prices for oil and gas, with India being a main beneficiary.
However, India pays with its own currency, the rupee, which is not freely convertible and is stored in Indian banks. The country's restrictions on capital flows have meant sales worth about $1 billion a month cannot get back to Russia.
Payment problems have delayed shipments of Sokol to the Indian Oil Corp (IOC), causing India's biggest refiner to buy more oil from Saudi Arabia.
An IOC source told Reuters that the company did not expect to receive any Sokol shipments any time soon due to a disagreement over payments. Newsweek has emailed Indian Oil Corp for comment on Monday.
"Russia faces the risk of losing market share to the Middle East if it is unable to find a workaround to the payment issue," Marcus Fishburn, head of disputes and investigations at geopolitical and cyber-risk consultancy S-RM, told Newsweek.
"However, where there's a will, there's a way— and the will is certainly there between India and Russia," he said. "This is not a grievous issue for the Russian oil trade, but it will likely come as an irritating delay."
In December, Bloomberg reported that almost 5 million barrels of Sokol grade crude did not make it to Indian refiners, and tankers were idling miles from their destinations. The agency did not specify the cause for the holdup but said that it may have been due to U.S. sanctions on tankers hauling Russian crude in breach of a $60 price cap imposed by the Group of Seven nations.
Russia has managed to work around these restrictions through sanctions-busting "ghost" ships, which are insured in non-Western states and switch off their automatic identification systems to avoid being tracked.
Fishburn said that the ownership and management structures of vessels have been reorganized, often through shell companies, to obscure their connections to Russia. Russian crude is also mixed with oil from other places, again to obscure its origins.
"This is happening in Singapore and Turkey, as well as at sea via ship-to-ship transfers which are very difficult to police," Fishburn said. "As long as Russia continues to find middlemen and buyers to facilitate its shadow trades, the true value of its oil revenue will remain difficult to capture."
The trading activity of Russia's shadow fleet is not a solution to the cargo stranded off South Korea, he said. "Offloading the oil back onto smaller vessels and breaking it down into smaller trades, all while disguising its origin, would be hard to manage and extremely inefficient."
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