September and October witnessed significant new developments in the Russia/Ukraine conflict. The retreat of the Russian army from key towns and strategic locations in the Ukrainian east, the threat of nuclear weapon usage and the suspected sabotage of the Nord Stream 1 and 2 gas pipelines have all exacerbated tensions in the ongoing conflict.

To date, the European Union (EU) has announced concurrent sanctions packages covering individuals, entities and traded goods, with the most recent 8th package released in October. The forthcoming oil price cap defined by the U.S. takes effect on 5th December for crude oil and 5th February for refined products. The cap will attempt to curtail the sale of Russian seaborne oil unless it is purchased at or below the price cap. At the time of publication, the price has not been set but a 'coalition of countries will conduct a technical exercise to consider a range of factors and, aided by a rotating lead coordinator, reach consensus on the level at which the price cap is set'.

In the context of the above, our latest paper will provide insight on the most recent coverage of the conflict by assessing the impact on trade compliance operations in the following areas:

• Vessel activity in high-risk areas, including illicit shipping practices
• Mediterranean ship-to-ship transfer hubs and Russian oil cargoes
• Russian oil movements and trading partners
• Russian supply chain activity and trends
• Potential dual-use goods and commodities of concern exported to Russia

Key Takeaways

• The number of vessels in the Joint War Committee Crimea zone is falling. Previous updates on vessel activity noted that in July 442 vessels (of which 101 were dark for 7 days or more) has now dropped to 361 and 59 are dark for 7 days or more
• From April to September there has been a cumulative increase in the number of cargo-carrying vessels going dark in Russian waters. Equally the number of hours these vessels have been dark has increased slightly
• Russian port activity weakened in Q2 2022 but has since picked up in Q3. Most activity has been for shipments (containerised and non-containerised) moving east to India, China, South Africa, Turkey and UAE. These are possible transshipment ports for goods to or from EU or G7 countries
• Greek, Maltese and Cypriot tankers continue to be involved with the load and discharge of Russian crude. STS transfer hubs off Greece and Malta continue to be in operation, Russian cargoes are transshipped and moved to larger tankers which then sail to other destinations
• Sales of crude oil tankers have increased throughout September and October 2022 and a number have been purchased by unknown buyers. A potential shadow network of large crude oil tankers may have been added to the Russian fleet
• The Russian supply chain has shifted focus away from the west to the east. Russian partners such as India, China, UAE, Turkey and others have increased their total trade value over the last 6 months
• Turkey, Hong Kong, Bahrain, South Korea and China are exporters of potential dual-use goods to Russia. In certain cases, Turkey and China are exporting goods such as antennas, radar apparatus, vacuum pumps and optical sights in larger volumes
• In mid-October there were 78.2m barrels of Russian oil on the water and 99 vessels in transit. The Top 5 destinations for Russian crude oil were China, India, Netherlands, Turkey and Italy
• Russian crude oil continues to exit western markets but has shifted east, most notably to China, India and Turkey. For the latter three countries, Russian crude oil shipments have increased by 50%. Western markets have seen a reverse of this, down 65% since their 2021 high-point
• S&P Global Commodity Insights surveyed major Asian refiners and forecasts the U.S. oil price cap will be set between $48/b - $55/b for Russian crude
• The Urals/Brent spread in Q2 hit a 50% discount but has tightened in late September to a 30% discount on the Russian blend

To learn more, download the full complimentary whitepaper 'The Impact of Russia's Invasion of Ukraine: A Trade Finance Compliance Perspective - October 2022'.

The paper for the August update is also available here.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.