Nearly 15 million barrels of Russia’s Sokol crude — meant for delivery to India — are sitting on tankers idling off the coasts of Malaysia and South Korea. They show little sign of moving.
Twelve tankers are anchored, holding the key Russian crude grade. Most haven’t moved far for more than a month, vessel tracking data compiled by Bloomberg show.
The build-up started when ships carrying the crude to ports around the Indian coast came to a halt late last year and then turned back towards the South China Sea as December drew to a close. Since then, the stranded shipments have been added to at a rate of about two new cargoes a week.
It looked like the situation was starting to ease earlier this month, with three cargoes heading back to the south Asian nation. While a fourth is now signaling its destination as the Indian east coast port of Visakhapatnam, most remain stuck.
And more continue to arrive, with an average of one 700,000 barrels cargo loaded onto specialized shuttle tankers at the De Kastri export terminal every three to four days.
Those shuttle ships are piling up off the South Korean port of Yeosu, where they normally offload their cargoes onto other vessels for onward shipment to India. The hold-up could soon start to curb the pace of exports, if the shuttle tankers aren’t freed up soon to take on fresh cargoes.
The fleet of seven ships, the most recent of which were delivered to Russia’s Sovcomflot PJSC from South Korea’s Samsung Heavy Industries shortly after Moscow’s troops invaded Ukraine almost two years ago, were specifically designed for the job of hauling Sokol crude. Ice resistant, with a shallow draft and a bow-loading manifold that allows them to take on cargoes from the offshore terminal at De Kastri, they can’t be replaced with other ships.
All seven of those ships are now holding cargoes. Four were anchored off Yeosu for at least a week, but three departed for Chinese ports over the weekend, as the need to free up the vessels becomes more acute.
Three Sokol cargoes have already been delivered to ports in the north of China this month. That’s up from the normal level of one or two cargoes a month taken by the country’s refiners.
Reopening India
Indian sources have given different reasons for the disruption to supplies.
Oil Minister Hardeep Singh Puri said in January that refiners reduced oil imports from Russia as discounts on cargoes weren’t attractive, dismissing the notion flows dropped because of payment-related challenges.
That view has been echoed by refiners themselves, with a person familiar with the operations of one processor saying that it has no plans to purchase Sokol as there is a premium of $2-$3 barrel compared with Urals, which means it doesn’t make any commercial sense to buy.
However, Puri subsequently said that enforcement of a price cap imposed on Russian oil exports by the Group of Seven nations, along with challenges with shipping, had hampered some deliveries of Sokol to India.
With Sokol trading above $70 a barrel, shipments of the grade are being keenly tracked by the US Treasury, which has begun taking a tougher line on sales of Russian crude that breach the cap.
Several, but not all, of the Sokol cargoes that turned away from India were carried on vessels that had either been named explicitly on US sanctions list, or were managed by SUN Ship Management D Ltd., a company owned by Sovcomflot that’s been sanctioned
In the case of other cargoes, banks declined payment due to lack of clarity on ownership and the price exceeding the cap, according to market analytics firm Kpler and several Indian oil refinery officials.
Recent deliveries of Sokol crude to India suggest that some of those difficulties have been overcome, at least for a handful of refiners.
After Washington tightened sanctions, India’s banks have become much more cautious. They are demanding attestation from Indian refiners that the crude was purchased below the price cap and not carried on a sanctioned ship, according to a person with direct knowledge of the matter who asked not to be identified because of the sensitivity of the issue.
Nayara Energy Ltd, part-owned by Russia’s Rosneft PJSC, received a cargo at its Vadinar import terminal on Feb. 6.
Another was delivered on Feb. 15 to Hindustan Petroleum Corp Ltd’s refinery at Mumbai. The HCPL cargo was purchased through a trading company, rather than direct from the producer, according to a source familiar with the deal.
A third tanker full of Sokol is now anchored off the port of Visakhapatnam, where HCPL also has a refinery and a fourth is heading to Sikka, the discharge location for Reliance Industries Ltd’s refinery.
Sikka is adjacent to Vadinar and it’s not uncommon for ships to change their signals as they get closer.
India is Sokol’s largest buyer and the grade accounts for about 10% of its total imports from Russia. Unless Sokol imports are normalized, India’s shipments from Russia are unlikely to hit the 2.1 million barrels a day reached last spring.
There is still no clarity whether transferring cargoes onto unsanctioned tankers will unlock the Sokol trade to India. But one thing is clear, Indian refiners are in not rushing back yet.
（Picture: Veer）
