In September, Russia's oil export revenues experienced a notable drop of 3.9%, decreasing from $15.3 billion in August to $14.7 billion. This decline was attributed to lower global oil prices rather than stricter sanctions, as highlighted in a study conducted by KSE Institute.

The research reveals that while the volume of Russian crude oil and oil product exports rose by 0.5 million barrels per day, this increase could not offset the loss in revenue resulting from falling oil prices. Consequently, the income from exports declined. According to the study, the price of Urals oil FOB Primorsk and Novorossiysk decreased by $6.9 and $6.5 per barrel respectively, landing at around $62 per barrel. Additionally, the discount to Brent widened slightly, settling at approximately $11 per barrel.

Increase in Physical Exports and Insurance Challenges

The research noted an 8.6% increase in the volume of Russian crude oil exported by sea in September. However, only 8% of these shipments were insured by IG P&I, highlighting the reliance on alternative measures within the shipping industry.

A significant shift was observed in the export patterns from Russian ports. Exports from Black Sea ports dropped by 10.6% over the month and became entirely dependent on the shadow fleet without IG insurance coverage. This marks a notable change from August when 16% of shipments were insured.

Conversely, exports from Baltic Sea ports surged by 30.2% month-on-month, with the share of insured vessels standing at 16%. Meanwhile, the insurance coverage for exports from Pacific ports remained minimal at just 2%, and Arctic port exports were entirely uninsured.

Sanctions and the Shadow Fleet

The U.S., EU, and the UK have stepped up sanctions against Russia’s shadow fleet, leading to the removal of vessels from commercial operations. As of October 21, a total of 92 tankers had been sanctioned for transporting Russian oil. The study noted that, in response to these measures, Russia reactivated 22 tankers that had been idle for extended periods, with 17 of them navigating through or near EU and G7 waters. However, 70 tankers remain outside commercial use.

During September, 112 shadow tankers carrying crude oil departed from Russian ports, with 79% of them being over 15 years old. Additionally, two very large crude carriers (VLCCs), which are too large to be loaded directly at Russian ports, were utilized for ship-to-ship (STS) oil transfers.

To expand its shadow fleet operations, Russia has started transferring tankers that were previously under Sovcomflot's ownership to other management companies to obscure true ownership details.

Support from Foreign Managers and Evasion Tactics

Ship managers from the UAE and China continue to assist Russia in exporting crude oil at prices above the established price cap. According to the report, these managers facilitate document forgery and STS transfers to disguise the oil’s true origin and the tankers' routes.

A double-sale scheme has also been employed by Russia, enabling it to bypass sanctions with the help of these ship managers.

Key Importers and Shifts in Demand

The study points out that India, China, and Turkey remain the primary importers of Russian crude oil, collectively accounting for 98% of total export volumes. Notably, India increased its imports by 13.5%, reaching 1.848 million barrels per day, while China saw a 15.6% rise, importing 1.358 million barrels per day.

Turkey, despite a significant 33.3% reduction in imports during September, maintained its position among the top three importers, purchasing 132,000 barrels per day—its lowest level since December 2022.

Revenue Projections Amid Sanctions and Price Caps

According to KSE Institute's estimates, Russia's oil revenues, under the current price cap regime and existing sanctions, are projected to reach $187 billion in 2024 and $143 billion in 2025. However, lax enforcement of these measures could lead to an increase in revenue, potentially reaching $190 billion and $174 billion for 2024 and 2025, respectively.