Putin’s oil stops Spain on its way to China


The New World created by Vladimir Putin’s invasion of Ukraine has produced a new center for the oil trade: the city of Ceuta—a tiny Spanish enclave that juts out from Morocco into the Mediterranean like a thumb. There, in calm seas far from prying eyes, Russia trades oil tankers, and it Technology that allows it to reduce shipping costs, overcome restrictions, and provide seamless logistics services to its remaining customers. Results? Russian oil is still flowing to the world market in significant quantities, barely below pre-war levels despite US and EU sanctions. Yes, the Kremlin has to sell its oil at a discount, but it still ships a lot of it.

Until it invaded Ukraine, Russia rarely used the waters near Ceuta as a stopover for its oil. At the time, Moscow was shipping crude directly to European refineries by small tankers. But the Kremlin has begun to use the sea near the Spanish city as a base for ship-to-ship transfers, first sporadically, now routinely. The path goes like this: Russia loads crude into small-scale tankers called Aframaxes in the Baltic Sea. Export terminals, such as Primorsk and Ust-Luga. The ships were reinforced to break through the Arctic ice during the winter, and transport ore towards Ceuta. Near the city, Aframaxes, carrying some 700,000 barrels, are waiting for the arrival of the so-called Very Large Crude Carrier, or VLCC. Aframaxes planes approach the giant oil tanker and transfer cargo from ship to ship. Typically, up to three such operations are required to load a single vertical oil tanker, which can transport at least two million barrels. Next, VLCC begins its journey towards Asia, and tours Africa.

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Since December, six VLCCs have done just that, taking crude from more than 15 Aframex aircraft. Some of them are veterans of the oil black market, having in the past shipped Iranian and Venezuelan crude, according to Vortexa Ltd. , a consulting firm that tracks tankers. Russia and China appear to be lining up more exchange stations in Ceuta. Currently, there are two VLCCs waiting for the shuttle tankers to arrive. Moscow does not appear to be violating international law: the tankers largely stay within 12 nautical miles from shore, the limit of territorial waters — though they sometimes appear to have drifted near Ceuta, into what Spain considers its territorial waters, according to tracking. bloomberg. data. The Russians also adhere to international standards by maintaining ship lighthouses. But it is a risky business. Most tankers docking at Ceuta since December have seen better days. The eldest was 26, which is equivalent, in human terms, to someone in their 70s. Ownership is largely Russian and Chinese, and insurance coverage is vague at best. The risk of spillage is high. Spain better keep its naval patrols nearby, making sure nothing goes wrong. There’s a reason Russia can’t use other typical shipping areas, including Skaw, in Denmark, and Southwold, in England. Everyone points out that the local authorities there have made it clear that they will not welcome ship-to-ship maneuvers. The waters around Ceuta are beneficial for three reasons: First, despite spending hundreds of millions of dollars building a ghost fleet of Aframaxes—whose ownership is opaque—Russia doesn’t have access to many ice-class boats, which is one of them. The most important commodities of the shipping industry. If it had to carry cargo all the way from the Baltic Sea to China or India with Aframaxes, it would connect all its tankers quickly because of the length of the journey. The road from the Baltic to Ceuta takes ten days; Continuing to China would add 40 days. Second, it reduces cost significantly: economies of scale mean that transporting crude oil in a VLCC is much cheaper than transporting oil in an Aframax. Since there are more VLCCs available, they are also cheaper at the moment. Renting a small oil tanker costs less than $20,000 a day, while an Aframax costs $55,000 a day. Third, Ceuta is in just the right place: inside the Mediterranean, it’s sheltered from the gusty winds and winter swells of the North Atlantic. But it is so close to Gibraltar that the VLCCs picking up the cargo can quickly return to the open waters to sail around Africa towards Asia without losing much time. The other location used by Russia, the Kalamata Sea (Greece), forces tankers to go much further into the Mediterranean, suitable only for half-loaded VLCCs that can pass through the Suez Canal (the waterway is too shallow to reach complete it.Download VLCC).

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So the waters around Ceuta remain choked with Russian traffic. Discounted or not, every petrodollar counts for the Kremlin. Europe needs to pay attention to what happens at its front door.

More from Bloomberg Opinion:

• Few of Putin’s oil buyers demand big discounts: Julian Lee

• Can the energy bridge between Europe and Russia be rebuilt?: Javier Blas

• Be aware of the gap between the West and the rest: Clara F. Marquez

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Javier Blass is a columnist for Bloomberg Opinion covering energy and commodities. A former correspondent for Bloomberg News and commodities editor for the Financial Times, he is the co-author of The World for Sale: Money, Power, and the Traders Who Barter the Earth’s Resources.

More stories like this are available at bloomberg.com/opinion

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