Embargo on Russian oil not easy to enforce

MOSCOW • The European Union is mulling over an embargo on Russian oil and petroleum products, which would penalise countries and companies attempting to source their crude from the country.

In doing so, the EU would be joining the US in banning Russian oil. However, tracking down all consignments of Russian oil that should have been subject to the embargo may be easier said than done.

For one thing, many companies blend Russia crude oil with oil from other sources. But it is not just crude oil alone that is subject to blending in order to avoid the impact of sanctions; other refined petroleum products made up by a large component of Russian oil are also marketed as being sanctions-friendly.

One such example is the so-called Latvian diesel blend sold by European oil company Shell. The Latvian blend comprised only 49.99 per cent Russian crude, while the remainder of the barrel was sourced from elsewhere. This tactic has been made extremely lucrative on account of the deep discounts being offered on Russian oil due to Western sanctions.

According to Bloomberg, the typical trade goes from Primorsk, a Russian oil export town near St Petersburg, to Ventspils, a port in Latvia that has a large oil terminal and tanking capacity. That is where the blending takes place.

Shell has since apologised and undertaken not to use Russian crude oil in its petroleum products.

But there are many other locations where blending is happening, including in the Netherlands and on the high seas, in what traders call ship-to-ship transfers.

Ship-to-ship transfers have surged as buyers from countries such as India have jumped at the chance to snap up the discounted Russian crude.

Some Russian tanker ships have been switching off their location tracking systems to "go dark" in order to evade sanctions, making a crackdown harder.