Tankers Stranded in South Korea
More than 12 tankers loaded with 10 million barrels of Russian Sokol crude oil are stuck off the coast of South Korea.
The oil is not sold due to a mix of U.S. sanctions and payment issues.
Volume and Significance
The stranded oil is equal to 1.3 million metric tons, which is over a month’s production from the Sakhalin-1 project.
Sakhalin-1, earlier run by Exxon Mobil, faced a production decline after Exxon Mobil left Russia in 2022 following the Ukraine invasion.
Challenges for Moscow
Selling Sokol grade oil is challenging for Moscow due to sanctions and represents a major disruption to Russian oil exports since Western sanctions began two years ago.
U.S. Sanctions
Washington has imposed sanctions on ships and companies involved in transporting Sokol.
The aim is to reduce revenues for President Putin and his Ukrainian war efforts without stopping the global flow of Russian energy.
Current Situation
Currently, 14 vessels loaded with Sokol are stuck near South Korea’s Yosu port, including 11 Aframax vessels and 3 very large crude carriers (VLCCs).
Some VLCCs are acting as floating storage for Russian oil near Yosu.
Ship-to-Ship Transfers
VLCCs, like La Balena, Nireta, and Nellis, are transferring oil from smaller Aframax vessels, showcasing the strategy of moving oil from smaller to larger ships to save on freight costs.
Impact on Indian Oil Corp (IOC)
Shipments of Sokol to Indian Oil Corp (IOC) are delayed due to payment issues.
IOC is India’s largest refiner and is now using its inventories and buying more oil from the Middle East.
Payment Problems
A disagreement over the currency used for payment is cited as a reason for the delay in Sokol shipments to IOC.
Indian Oil Corp Deal
IOC has an annual deal with Russian oil major Rosneft to buy various Russian grades, including Sokol.
Both IOC and Rosneft have not commented on the situation when approached by Reuters.