The cost of transporting Russian Eastern Siberia–Pacific Ocean (ESPO) oil pipeline crude oil to China has skyrocketed, reaching nearly five times the rates seen before the United States imposed fresh sanctions on Moscow’s oil sector earlier this month.
According to traders familiar with the route, the rate for shipping oil from Kozmino, Russia’s Pacific port, to China has surged to $7 million this week. This marks a significant increase from $5.5 million last week and just $1.5 million prior to the sanctions. The traders requested anonymity due to the sensitivity of the issue.
The sanctions have heightened scrutiny on tankers involved in transporting Russian crude, especially those blacklisted under the new restrictions. Chinese ports have become increasingly cautious in handling such vessels, disrupting the flow of ESPO crude and causing logistical bottlenecks.
To compensate for the disruption, tankers previously servicing western Russian ports, such as Ust-Luga and Primorsk, have been redirected to eastern routes to maintain deliveries to China.
For instance, the Aframax-class tanker Legend recently made its first voyage to Kozmino, loading crude on 20 January. It is expected to deliver its cargo to Huizhou, a southern Chinese port city, as per data from commodity analytics firm Kpler.
This shift in trade routes highlights the growing challenges faced by Russia’s oil industry in adapting to sanctions. The elevated shipping costs reflect the increased risks and operational hurdles for operators navigating the sanctions landscape.
China remains one of Russia’s largest oil customers, with ESPO crude playing a pivotal role in trade between the two countries. However, the rising cost of transporting oil to Chinese ports could weigh on profit margins and affect the competitiveness of Russian crude in the Asian market over time.
The situation highlights the broader repercussions of the sanctions regime, which has disrupted traditional oil flows and forced the reconfiguration of global shipping routes. As sanctions tighten, both exporters and importers are grappling with higher costs and operational uncertainties, reshaping the dynamics of the global oil market.
