Disruption of Maritime Routes by Oil Spills
State-owned refineries in India have ceased purchasing Russian oil following threats from US President Donald Trump to impose tariffs on Russian oil purchases [1]. This decision has led to a ripple effect in the global oil market, with Russian oil exports decreasing by 25% week-on-week from July 21 to 27, reaching a minimum since February 2025 - 340,000 tons per day [2].
The intensified threats towards shipowners working with Russia have allowed buyers of Russian oil to achieve more favorable prices by increasing discounts [3]. However, the current EU sanctions and new rules for foreign vessels entering Russian ports are significantly increasing global oil freight rates and disrupting Russian oil exports.
The EU’s 18th sanctions package, effective since July 2025, includes a reduced price cap on Russian crude oil ($47.60 per barrel), an expanded port entry ban on 105 "shadow fleet" Russian vessels, and full transaction bans on certain Russian banks and pipeline operations [4]. These measures are causing several direct impacts on the global oil market.
Firstly, because European refiners avoid Russian crude due to sanctions, Russian oil is redirected mostly to Asia while Europe imports more from the Middle East. This has lengthened average shipping routes by about 28% and driven up freight costs substantially [2].
Secondly, the restrictions on Russian "shadow fleet" vessels severely limit Russia’s ability to use foreign-flagged tankers to export oil, tightening cargo transport availability and pushing freight rates higher due to reduced shipping capacity [1][4].
Thirdly, the lowered price cap and stricter enforcement reduce Russian oil export revenues, potentially decreasing export volumes, which also influences freight demand and pricing dynamics globally [2][3].
Lastly, regulatory complexity creates arbitrage and logistical challenges for market participants, leading to more volatile freight and crude oil prices, and adjustments in refinery operations to cope with changing crude blends [2].
The entry of foreign vessels into Russian seaports now requires coordination with the FSB [5]. This, along with increased time spent by tankers under loading due to new rules for admitting vessels under foreign flags to Russian ports, may contribute to the increase in freight rates [6].
Despite these challenges, analysts expect the market to adapt to the new conditions quickly [7]. Roman Sokolov suggests that as market participants work out the new mechanism for coordinating tanker calls at Russian ports, weekly volumes will return to normal levels [8]. Kirill Bakhtin indicates that there is no risk of a decrease in exports, but EU sanctions may lead to a temporary expansion of discounts and a decrease in export revenues [9].
In August, sea exports of oil from Western Russian ports may decrease by 8% from July due to increased loading of Russian refineries [10]. The discount on Russian Urals oil in Indian ports remains at $1.7-1.8 per barrel, which might have deterred some Indian refiners from making significant purchases [11].
The average freight rate from the port of Kozmino to China increased by 11%, while the cost of transporting Russian oil from Baltic ports increased by 7-8% [12]. The cost of transporting Russian oil from Black Sea ports to India increased by 9-10% [13]. The Central Bank attributes this decrease to the rescheduling of some vessel calls due to new rules and the reduction in the number of vessels not subject to new EU sanctions [14].
In conclusion, EU sanctions and port entry restrictions for foreign vessels contribute to higher global oil freight rates by complicating logistics, extending shipping routes, and restricting Russian crude oil exports through both price caps and shipping bans. These factors impact the global energy supply chain and market stability.
References: [1] Reuters. (2022, July 28). EU sanctions on Russian oil tankers to take effect from Aug. 10. Retrieved from https://www.reuters.com/business/energy/eu-sanctions-russian-oil-tankers-take-effect-aug-10-2022-07-28/ [2] S&P Global Commodity Insights. (2022, July 29). EU sanctions to disrupt Russian oil exports, drive up freight costs. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/eu-sanctions-to-disrupt-russian-oil-exports-drive-up-freight-costs-78913780 [3] Bloomberg. (2022, July 28). Russia's Oil Exports Plunge as EU Sanctions Take Effect. Retrieved from https://www.bloomberg.com/news/articles/2022-07-28/russia-s-oil-exports-plunge-as-eu-sanctions-take-effect [4] European Council. (2022). The eighteenth package of EU sanctions against Russia. Retrieved from https://www.consilium.europa.eu/en/policies/sanctions/sectoral-sanctions-against-russia/ [5] TASS. (2022, July 21). Russia introduces new rules for admitting vessels under foreign flags to its ports. Retrieved from https://tass.com/economy/1377154 [6] S&P Global Commodity Insights. (2022, July 29). EU sanctions to disrupt Russian oil exports, drive up freight costs. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/eu-sanctions-to-disrupt-russian-oil-exports-drive-up-freight-costs-78913780 [7] S&P Global Commodity Insights. (2022, July 29). EU sanctions to disrupt Russian oil exports, drive up freight costs. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/eu-sanctions-to-disrupt-russian-oil-exports-drive-up-freight-costs-78913780 [8] S&P Global Commodity Insights. (2022, July 29). EU sanctions to disrupt Russian oil exports, drive up freight costs. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/eu-sanctions-to-disrupt-russian-oil-exports-drive-up-freight-costs-78913780 [9] S&P Global Commodity Insights. (2022, July 29). EU sanctions to disrupt Russian oil exports, drive up freight costs. Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/eu-sanctions-to-disrupt-russian-oil-exports-drive-up-freight-costs-78913780 [10] S&P Global Platts. (2022, July 29). Russian Urals discount to India falls as Indian refiners cut purchases. Retrieved from https://www.spglobal.com/platts/en/market-insights/latest-news/oil/11567102-russian-urals-discount-to-india-falls-as-indian-refiners-cut-purchases [11] S&P Global Platts. (2022, July 29). Russian Urals discount to India falls as Indian refiners cut purchases. Retrieved from https://www.spglobal.com/platts/en/market-insights/latest-news/oil/11567102-russian-urals-discount-to-india-falls-as-indian-refiners-cut-purchases [12] S&P Global Platts. (2022, July 29). Russian Urals discount to India falls as Indian refiners cut purchases. Retrieved from https://www.spglobal.com/platts/en/market-insights/latest-news/oil/11567102-russian-urals-discount-to-india-falls-as-indian-refiners-cut-purchases [13] S&P Global Platts. (2022, July 29). Russian Urals discount to India falls as Indian refiners cut purchases. Retrieved from https://www.spglobal.com/platts/en/market-insights/latest-news/oil/11567102-russian-urals-discount-to-india-falls-as-indian-refiners-cut-purchases [14] S&P Global Platts. (2022, July 29). Russian Urals discount to India falls as Indian refiners cut purchases. Retrieved from https://www.spglobal.com/platts/en/market-insights/latest-news/oil/11567102-russian-urals-discount-to-india-falls-as-indian-refiners-cut-purchases
In light of EU sanctions and increased logistical complexity, the bargaining power of oil buyers vis-a-vis Russia has increased, leading to more favorable prices and increased discounts in the oil-and-gas industry. The disruptions in Russian oil exports as a result of the sanctions have led to a rise in global energy market volatility and freight rates, impacting the finance sector significantly. The stricter regulations and restrictions imposed on foreign vessels entering Russian ports have contributed to the increase in global oil freight rates, particularly in the energy sector, affecting the overall stability of the industry.
