US says Ukraine to avoid targeting tankers, Black Sea oil site
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Some companies that had provided Ukraine a list of ships not to target saw some of their vessels come under attack anyway.
PHOTO: REUTERS
- Ukraine has agreed not to target non-Russian oil tankers and key Black Sea infrastructure used for exporting Kazakhstan’s crude to ensure safer commercial shipping.
- The Caspian Pipeline Consortium terminal is vital for Kazakhstan’s oil exports, handling 2% of global crude and supporting Europe’s refineries.
- Despite the agreement, recent drone attacks and security fears have reduced oil shipments and increased tanker costs for routes from Novorossiysk to the Mediterranean.
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WASHINGTON – Ukraine has agreed not to target some non-Russian oil tankers and Black Sea infrastructure critical for exporting Kazakhstan’s crude, after strikes on vessels in July halted loadings, according to a US official.
Ukraine has set up points of contact to allow commercial shippers to communicate information and ensure safe passage, said the US official, who asked for anonymity to speak candidly about the private agreement.
The commitment, which follows a meeting between senior US government leaders and Ukrainian leadership, marks a potentially significant step in increasing oil flows in the region, after a spate of recent attacks on ships near the Caspian Pipeline Consortium (CPC) terminal in Novorossiysk, Russia, chilled activity.
The CPC terminal is critical for getting Kazakhstan’s oil to market because the Central Asian country does not have significant capacity to export barrels via alternative routes.
The CPC normally handles about 2 per cent of global crude supplies, and Europe’s refiners are heavily reliant on volumes from the region.
Ukraine has intensified its campaign against Russian oil ports as part of the war that began with Moscow’s invasion in 2022, including attacks on ships at the CPC terminal, which has disrupted loadings and halted some operations as shipowners steered clear.
It has come at a time when the world can ill afford more disruptions in global oil flows, with the war in Iran and a reduction in volumes through the Strait of Hormuz already keeping barrels off the market.
Higher costs for crude and fuel have rippled through the global economy and spurred climbing pump prices in the US before November midterm elections expected to hinge on voters’ economic concerns.
Under the agreement secured by the US, Ukraine has committed to refrain from targeting CPC infrastructure and non-Russian vessels bound for the terminal as long as those ships are not otherwise subject to Ukrainian sanctions and are not carrying Russian cargo, according to the US official.
Kyiv is also providing instructions to shippers clarifying what vessels are subject to attacks.
Under the arrangement, the official said, the vessels cannot be subject to Ukrainian sanctions, must not transport Russian oil or other cargo, and cannot be owned by Russian individuals or entities.
Ukraine remains in close contact with American companies and the Trump administration on all issues related to the safety and security of commercial shipping, another person familiar with the matter said.
It is not clear if the agreement will be enough to normalise volumes or fully assuage shippers fearful of attacks, after previous arrangements meant to protect transits proved insufficient.
Some companies that had provided Ukraine a list of ships not to target saw some of their vessels come under attack anyway.
Additionally, while shipments have since restarted, they have remained at lower-than-normal levels as a result of wider drone attacks near Novorossiysk.
The Russian authorities generally halt oil loadings when there are drone alerts at terminals.
An initial wave of drone strikes the week of July 20 prompted commercial vessels chartered by US companies to stop loading at the CPC terminal.
Although they resumed July 27, commercial vessels loading at the terminal were struck by drones two days later.
The recent disruptions mean exports of CPC Blend are expected to fall by about a third this month, according to people familiar with the matter.
There is some uncertainty about those figures, however, as they do not include cargoes from July that were delayed until August, while the recent stoppages could yet delay some August cargoes.
The risk of loading at the terminal is also showing up in the cost of booking tankers to sail there.
Only a limited pool of shipowners have been willing to do so, as it involves calling at a Russian port, and some have been deterred by the recent attacks.
Earnings for ships taking oil from CPC to the Mediterranean were more than US$400,000 (S$511,280) a day on Aug 7, according to data from the Baltic Exchange in London, the highest level on record for that route. BLOOMBERG
