THE RISE OF THE KREMLIN’S GHOST SHIPS
As Putin’s ‘Special Military Operation’ passes its first anniversary, there does not appear to be any imminent hope to and end of hostilities.
Russian forces have re-engaged along the Eastern front on the Donbas and in the South after a quieter period of near stalemate following some strategic failures last year. Even after all of the western media continues to report that the Russian Army is in disarray with substantial losses of both kit and personnel, the Kremlin’s War Machine hasn’t yet given up the ghost. To an even greater extent, the West’s disillusion that both sanctions and Russian belief in the war effort are waning on the regime do not seem apparent. At present, the Russian army in Ukraine is firing around 20,000 artillery rounds daily with no hesitance in stopping. Supplies continue to flow and no additional economic pressure appears to be squeezing the current Kremlin decision making.
According to the EBRD, Putin’s Russia is forecast to return to growth next year, 2024, as the Kremlin adapts and finds new ways to evade the Western sanctions. The Russian economy actually contracted less than anticipated in 2022 due to high energy prices but the price cap and reduction in natural gas exports has started to take its toll. Russian GDP is anticipated to contract by 3% in 2023 due to the effect of declining oil and gas revenue followed by a 1% bounce back of growth in 2024.
Every nation at war needs to ensure it has the economic capacity to sustain itself for the duration of the conflict and to an even greater extent, sustain the domestic economy through disruption – be that through sanctions or through the disruption of global supply. The Russian economy is very much a resources dominated economy, an energy superpower with the world’s largest gas reserves and the world’s leading natural gas exporter and the second largest oil producer and exporter globally.
Since the ever burdensome sanctions, imposed by the west have become ever more rigorous and created major headache and issues for Moscow, but surprisingly have not prevented the Russian war machine from slowing down.
The EU introduced an oil cap and also a ban on the transport of Russian crude oil (from 5th December 2022) and petroleum products (from 5th February 2023). The EU also banned its long dominant shippers, lenders and insurers from facilitating the sale of Russian crude to other buyers unless it as sold below the price cap of $60/ba for crude and $100/ba for refined products set by the west.
The system was designed to keep Russian cargoes flowing, albeit at a lower level and to put pressure on the Kremlin’s coffers. Well, the seaborne trade is most certainly flowing and analysts are now saying that there will be a substantial enough supply of tankers to keep both Russian crude and refined products flowing.
A recent report by Trafigura has highlighted that the Russian shadow fleet now numbers circa 600 vessels. About 400 vessels which equates to 10% of the global fleet have switched from the main stream open market to purely Russian business according to Trafigura.
In recent months, Kremlin linked parties have been on a substantial spending spree, buying up copious amounts of questionable tonnage of vintage relics to ensure that Russian seaborne exports continue flowing at full throttle. Numerous sales have been made off the market and the fleet continues to grow. According to TradeWinds, as many as 393 tankers, or 43% of the vessel transactions on the open market since the Russian invasion of Ukraine were sold to unknown entities or newly established companies. What is even more fascinating, is the amount of tankers that were previously registered in EU member states including Malta, Cyprus and Greece have left their registry in the past 6 months.
About 400 vessels, which equates to 10% of the global fleet have switched from the main stream open market to purely Russian business according to Trafigura.
5 | ADMISI - The Ghost In The Machine | Q1 Edition 2023
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