Sanctions Drive Surge in Non-Sanctioned Tankers for Russian and Iranian Oil

In a major shake-up of the global oil market, a wave of sanctions on Russian and Iranian oil exports has prompted a dramatic rise in the demand for non-sanctioned vessels, significantly impacting global trade routes. As the U.S. continues to tighten its sanctions on both countries' oil industries, non-sanctioned tankers are now stepping in to fill the gap, particularly between Russia, Iran, and China. This shift is set to result in a rebound in China’s imports of cheaper crude from these two key producers, following a two-year low in February.

Surge in Freight Rates Drives Interest in Non-Sanctioned Tankers

The Biden administration’s recent sanctions, which targeted dozens of Russian vessels used for transporting the ESPO crude blend from Russia’s Far Eastern port of Kozmino to independent Chinese refiners, are among the most aggressive yet. These sanctions have disrupted trade and triggered a scramble for non-sanctioned vessels, leading to a significant surge in freight rates. Analysts report that daily shipping costs have doubled or even tripled over the past month as operators rush to secure tankers that are not on the U.S. sanctions list.

With sanctions tightening on both Russia’s and Iran’s oil trade, vessel owners are eager to capitalize on the skyrocketing shipping rates, moving Russian and Iranian oil to China and other markets. As a result, at least 11 non-sanctioned tankers have recently joined the oil route from Russia to China, including vessels previously used for transporting Russian oil to India. This reshuffling of tankers highlights the growing demand for “clean” tankers—those not involved in the sanctioned trade.

Iran's Rising Crude Exports to China

In addition to Russian crude, Iranian oil shipments to China have also seen an uptick, bolstered by the opening of new receiving terminals and an increase in ship-to-ship (STS) transfers. These developments signal a continuation of China’s robust appetite for discounted crude, even as the U.S. increases pressure on Iran’s oil exports.

The combination of these factors has led to a rise in Chinese imports of cheaper crude, as the nation’s refiners continue to take advantage of the discounted oil from both Russia and Iran. However, analysts warn that the additional sanctions imposed on Iran’s shadow fleet could further complicate tanker logistics and trigger another reshuffle of trade routes.

The Demand for "Clean" Tankers and the Future of Global Oil Trade

Mary Melton, a Senior Freight Analyst at Vortexa, notes that the ongoing demand for "clean" (non-sanctioned) vessels is likely to remain elevated, given the persistent pressure on sanctioned oil exports from both Russia and Iran. With the U.S. continuing its “maximum pressure” campaign, the logistics of sanctioned trade will inevitably influence the oil market dynamics in the coming months.

As non-sanctioned tankers step in to facilitate the flow of Russian and Iranian oil to China, the global oil trade is undergoing a significant transformation. This change is a direct result of the U.S. sanctions aimed at curbing the flow of oil to key markets, forcing oil traders and vessel operators to adapt quickly to new trade routes and logistical challenges.