US sanctions put deep freeze on Russia’s Arctic oil business

Russia’s vast Arctic oil industry has faced significant disruptions due to recent U.S. sanctions, Reuters reports. Restrictions on the use of Kremlin-owned tankers and storage facilities have led to a halt in the delivery of crude oil already purchased by Asian buyers and stored in warehouses.

“Three sources who spoke to Reuters on condition of anonymity said all three of Russia’s Arctic oil grades – Novy Port, ARCO and Varandey, with about 300,000 barrels of output per day – face disruption,” the report says.

The U.S. restrictive measures targeted the tankers Umba and Kola, as well as more than ten smaller vessels used for shuttle deliveries of oil from the fields. The ships and infrastructure are critical to Russia’s Arctic oil business and account for one-tenth of the country’s maritime oil exports by sea.

These disruptions could leave Russia with millions of barrels of unsold oil in storage, Reuters sources said.

“According to one, the limited storage capacities at all three projects mean a couple of weeks of loading disruptions might lead to cuts in output,” the reports says.

Since oil from the Arctic is intended for export, there is no corresponding logistical system for domestic delivery within Russia.

“This means that if there are no buyers for those oil grades, volumes will have to be kept in floating storage.”

As reported earlier, the U.S. Treasury Department on Jan. 10 imposed sanction on more than 180 vessels, oil companies and traders, and insurance providers to further reduce Russian revenues from energy exports.