Brief: Last-Minute Sanctions on Russian Oil

The US Treasury Department's Office of Foreign Assets Control (OFAC) released the toughest sanctions on Russian tankers since the start of the Russia-Ukraine War in 2022.

Note: The CFTC delayed its weekly Commitments of Traders Report due to January 9th’s National Day of Mourning for President Carter. Tomorrow’s Intel Brief will cover updated positioning data for natural gas and crude markets.

Mobius Intel Brief:

On Friday, the Biden administration announced its largest package of sanctions on Russian tankers since Russia invaded Ukraine in 2022. The Treasury Department’s Office of Foreign Assets Control (OFAC) added sanctions on 183 vessels, including 143 tankers that collectively account for over 40% of Russian seaborne crude exports.

Key Intel

  • The Biden administration says it added the sanctions in its final week in office to give the incoming Trump cabinet more leverage in negotiations with Russia. The sweeping measures coincide with tighter sanctions enforcement on Iranian crude exports and its shadow fleet of tankers since December.

  • According to vessel-tracking firm Kpler, the vessels sanctioned in the latest OFAC package handled over 530 MM barrels (~1.45 MMb/d) of Russian crude exports last year.

  • Over 50% of these exports (~300 MMb) were secured by China. Kpler data shows sanctioned tankers were responsible for approximately 60% of China’s seaborne imports of Russian crude. The sanctioned tankers carried approximately one third of India’s imports of Russian crude last year.

  • China and India predominately imported light Russian crude grades Sokol and ESPO in 2024. The countries will likely turn to the Middle East and Africa for alternative supplies.

  • Impacts to Asian refined product exports and Europe’s upcoming refinery maintenance season will likely support Atlantic Basin product markets by easing competitive pressures from Nigeria’s new 650 Kb/d Dangote refinery and Mexico’s forthcoming 340 Kb/d Dos Bocas plant.

Looking Ahead

Russia shares its shadow fleet of tankers with Venezuela and Iran. We are already seeing indications of tighter sanctions enforcement on Iranian exports to China, and the latest OFAC sanctions on Russian vessels could further reduce Iranian crude supplies in Asia.

As noted in recent Mobius research, the first Trump administration led ‘maximum pressure’ campaigns against Iran and Venezuela, reducing the countries’ combined crude output by approximately 60% over four years. Several picks in the upcoming Trump administration have indicated plans to resume a similar policy stance against Venezuela’s Maduro regime.

The administration could delay a maximum pressure campaign on Venezuela/PDVSA if the Biden administration’s latest Russia sanctions package meaningfully reduces Russian exports, particularly as prolonged OPEC production cuts (-5.9 MMb/d) have reduced US and global crude inventories to decade+ lows.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation with respect to the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is exclusively intended for Mobius clients and is not considered promotional material.