Tankers with Russian crude sail via Arctic route to China, some without permits

Russia has started crude exports via its Arctic shipping route during this year's navigational season, according to ship-tracking data, with all shipments on sanctioned tankers while some don't have official permits.

The LR1 Kirill Lavrov, after lifting 475,000 barrels of Novy Port crude from Varandey on July 15, has sailed through the Northern Sea Route and is set to discharge the cargo in Dongying on Aug. 13, S&P Global Commodities at Sea data shows.

The Aframax Nevskiy Prospect loaded 745,000 barrels of the same light, sweet grade from Murmansk and the Suezmax Latur lifted 968,000 barrels earlier this month, and both are navigating the emerging trade lane en route to China.

Russia has often raised crude exports to China via the Arctic route during the navigation season, when voyage time to the world's top seaborne crude importer is shorter and freight costs lower.

Total Russian crude shipments from its western ports through the Barents Sea east via the Bering Straits to China reached 7.86 million barrels in 11 shipments last year, compared with 9.49 million barrels across 13 shipments in 2023, according to CAS.

Tanker transit time from Russia's Arctic oil hubs to Shandong in China via the Suez Canal usually amounts to six weeks, while the Northern Sea Route, only navigable from July to November when ice sheets retreat, can theoretically reduce the voyage time by 40%.

Preliminary CAS data shows Russia's Arctic crude exports to China have reached 143,000 b/d so far in August, an 11-month high and more than tripling from 47,000 b/d in July. Exports to India, another major Russian crude buyer, has fallen to 87,000 b/d from 188,000 b/d as New Delhi faces pressure from the US and EU to cut purchases.

Environmental concerns

The three tankers engaged in NSR shipments this year, aged between 15 and 22, have all been sanctioned by Western authorities to undermine Moscow's oil revenues following Russia's invasion of Ukraine in 2022. Sanctioned tankers tend to lack access to proper insurance and maintenance to meet international regulatory requirements.

The Nevskiy Prospect has protection and indemnity coverage from SOGAZ, also sanctioned, while the other two ships don't have known coverage, according to S&P Global Maritime Intelligence Risk Suite.

Also, the Kirill Lavrov is the only ship on the Russian NSR General Administration's permission list. The trade lane runs entirely through Russian Arctic territorial waters and its usage needs to be approved by the authority.

"The Clean Arctic Alliance is deeply concerned about any vessel operating in the Arctic which doesn't meet the minimum standards set by the International Maritime Organization," the environmental group said in a statement, while adding that sub-standard ships could present a high risk to the fragile Arctic environment.