Sovcomflot, Russia’s largest shipping company, is renaming and reflagging its oil tankers in order to evade the US and European Sanctions. According to Bloomberg, at least four tankers have been renamed and reflagged to Gabon. The Kemerovo is now known as NS Columbus, the Belgorod as NS Bravo, the Kaliningrad as NS Captain, and the Krasnoyarsk as NS Creation.
The Strategy Behind Renaming and Reflagging
The U.S. Department of the Treasury has taken significant action to responsibly reduce Russia’s revenue from oil sales by targeting Joint Stock Company Sovcomflot (Sovcomflot), which is Russia’s state-owned shipping company and fleet operator.
Oil tankers often undergo name changes after being sanctioned to distance themselves from sanctions databases. Despite these name changes, the tankers can still be identified through unique and unchanging numbers registered with the International Maritime Organization (IMO).
Sovcomflot’s subsidiary SUN Ship Management (D) Ltd continues to manage a large number of SCF vessels and remains an important member of the group and it was separately sanctioned by EU authorities to control its movements. Sun Ship Management is a critical element of the renaming and reflagging efforts of Sovcomflot.
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Sovcomflot’s Importance in Russia’s Oil Transportation
Bloomberg’s report highlights Russia’s heavy reliance on Sovcomflot’s giant tanker fleet for oil transportation. According to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker, Sovcomflot remains the world’s largest owner of Aframax tankers, each capable of carrying about 700,000 barrels of oil.
Previously in October 2023, Sovcomflot, Russia’s leading tanker group, had transferred dozens of its ships to a new management company based in Dubai. This strategic move of renaming and reflagging was aimed at boosting trade through the Dubai-based entity amidst increasing financial restrictions.
Sovcomflot, a state-owned company, has been facing sanctions and other restrictions from the UK, the European Union, and the United States, which have limited its financial activities.
Russian tankers were unable to get spare engine parts as the Western engine makers pulled out and they faced more difficulties like this. Dubai-based entity was the part of renaming and reflagging strategy to gain access to the services.
To navigate these challenges, the company decided to transfer a significant portion of its fleet, which includes crude, oil products, and liquefied natural gas tankers, to the new Dubai-based management company.
Sovcomflot has had to relocate its overseas operations from Cyprus to Dubai as part of its efforts to deal with these capital restrictions over the past year. This shift reflects the company’s proactive approach to adapt to the evolving geopolitical and financial landscape.
US Sanctions and Russia’s Oil
The United States, along with other G7 countries forming the Price Cap Coalition, is actively pursuing additional measures to reduce Russia’s ability to earn oil revenues. These revenues are crucial for the Kremlin’s efforts in the ongoing conflict with Ukraine. Western countries are also tracking the strategy of Renaming and Reflagging.
Impact of Sanctions on Russian Oil Companies
The US intensified its sanctions against a wide range of tankers carrying Russian oil in October 2023. Consequently, dozens of sanctioned tankers have been idle since then. Russian oil companies have also faced payment delays for oil and fuel for several months. This is largely due to increased caution by banks in China, Turkey, and the United Arab Emirates, prompted by secondary sanctions imposed by the United States.
The renaming and reflagging may help to ease issues with getting services in international ports, bunkering and other financial operations for the new entity, though it is unlikely to be a long-term solution
