They're Not There: Russian Oil Tankers Disable Trackers and Silently Violate Sanctions

Russia's war in Ukraine has made the Russian Federation a pariah in the global energy market. With the outbreak of the war, an embargo was effectively imposed on Russian oil, while oil companies, trading houses, shippers and banks applied sanctions at the same time, reports CNN.

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But now there are signs that potential buyers are interested in Russian energy, at least in the shadows.

As the war in Ukraine drags on, Russian tankers carrying crude oil and oil products are increasingly disappearing from tracking systems.

So-called dark activity, where ships' transponders are turned off for several hours, has in the past been viewed by US officials as a deceptive practice that is often used to evade sanctions.

Dark activity among Russian-linked crude oil tankers has risen 600% since before the war, predictive intelligence firm Windward said.

“We are seeing an uptick in the number of cases where Russian tankers deliberately disable transmissions to circumvent sanctions,” Windward CEO Ami Daniel said in an interview. “The Russian fleet is beginning to hide its location and its exports.”

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And it's not just with crude oil. Similar trends are manifested in relation to other petroleum products.
According to Windward, which uses artificial intelligence to track the maritime industry, there were 12 instances of dark activity on Russian chemical tankers and petroleum products in the week of March 33. This is 236% higher than the weekly average for the previous 12 months.

"These ships want to disappear"

International regulations require ships such as oil tankers to keep their transponders on almost all the time.

In May 2020, the U.S. Department of the Treasury sent sanctions recommendations to the maritime, energy, and metals industries to address "illicit shipping and sanctions evasion."

The first example cited was "disabling or manipulating" automatic identification systems (AIS) on ships to "mask their movement".

"Manipulation and disruption of the AIS may indicate potential illegal or authorized activity," the Department of Finance warned.

Ships can be disabled for safety reasons, including when traveling through pirate-infested waters. But Daniel, CEO of Windward, said that's not the reason ships are going "dark" now.

“These ships want to disappear from the radar. From a compliance standpoint, this is worrying,” he said.
A Treasury spokesman said the agency is "aware of these reports" and is working with partners and "various methods" to not rely solely on transponder transmissions to monitor ships of interest.

Taking a page from an Iranian play

Similar behavior has been seen in the past decade when the United States imposed sanctions on Venezuela and Iran making it illegal to buy oil from those countries.

“Russia is following the Venezuelan and Iranian scenarios with minor deviations,” said Andy Lipow, president of consulting firm Lipow Oil Associates. The bottom line is that, unlike Venezuela and Iran, the West has not imposed sanctions directly on Russian oil.

Yes, the White House banned the import of Russian oil into the United States. But this does not prohibit other countries from buying Russian energy.

"PR Disaster"

However, the public stigmatization of doing business with Russia, along with the uncertainty of sanctions, has effectively led to the embargo. Analysts say this helps explain the surge in dark activity among Russian-flagged ships. Buyers don't want to be portrayed as buying up Russian oil during the bloody war in Ukraine.

“This is a PR disaster,” said Robert Yauger, vice president of energy futures at Mizuho Securities.

“Ships are turned off because they are afraid that if they contact Russian business, they will be blacklisted for some time and will not be able to do business in the future,” Lipov explained.

And yet there is a financial reason to buy Russian oil right now. Demand for energy is very high, and – in large part because of the sanctions – Russian oil sells for about $30 less than Brent crude, the world benchmark.

“You get a big discount,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets. “There is an economic stimulus if you are not worried about sanctions.”
Where does the oil go?

Research firm Rystad Energy estimates that between 1,2 million and 1,5 million barrels a day of Russian crude oil exports have disappeared in the five weeks since the war began.

“The direction of the remaining crude oil exports from Russia… is becoming increasingly ‘unknown’,” Rystad Energy wrote in a report this week, noting that this mystery oil is about 4,5 million barrels per day.

Analysts say there is evidence that refineries in China and India, the world's two largest oil consumers and fastest growing economies, are secretly buying Russian oil.

Tran said trading houses can buy Russian oil and place barrels in warehouses, including "floating storage" on tankers that remain at sea.

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In addition to covert activities, Windward has discovered that some ships and companies are still dealing with Russian-linked tankers and are involved in ship-to-ship transfers.

In 2020, the Treasury Department warned that ship-to-ship shipments, especially at night or in areas considered to be at high risk of sanctions evasion, are "often used to evade sanctions by disguising the origin or destination" of oil, coal and other materials.

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