The shadow fleet of oil tankers enabling Russia's war and undermining global sanctions
CBC
Russian President Vladimir Putin was sworn in for his fifth term in office this week, even as his country is beset by sanctions, bogged down in a years long war in Ukraine and cut off from capital markets.
But Putin has found a series of workarounds that have helped bolster growth, funded his country's war effort against Ukraine and worked to thumb his nose at the Western countries using economic sanctions to punish Russia.
"We are a united and great people and together we will overcome all obstacles, implement all we planned," said Putin in a brief inaugural address this week. "Together we will win."
The Russian economy is now poised to grow at a faster pace than any other G7 nation. Not surprisingly, the key to its economic success is oil.
After Russia invaded Ukraine, the West banded together to impose sanctions, curtail Russian energy exports and squeeze the Russian economy. And in many respects, it worked.
More than a thousand Western companies have left the country, according to a database compiled by Yale University. Over a million young, Russian men have fled the country rather than be drafted. Russian companies and banks are cut off from global capital markets and more than $300 billion in Russian central bank assets have been frozen.
But when it came to Russia's much vaunted energy sector, there was a dilemma.
Russia produces more than 10 per cent of the world's oil supply, behind only the U.S. and Saudi Arabia. Cutting off all energy exports would have driven up the price of oil everywhere.
So, Western countries, led by the United States, hatched something of a compromise by imposing a price cap.
Russia could continue selling its oil and continue using registered shipping vessels with insurance only if that oil was sold for less than $60 per barrel.
"We have this weird sort of compromise where we negotiate with ourselves into a situation which allows the Russians to completely cheat," said Bill Browder, the author, activist and CEO of Hermitage Capital Management.
On one hand, Browder says, plenty of non-Western countries were perfectly happy to buy up Russia's oil at prices well below market value. But he noted that Russia also found a way to skirt the price cap all together with what's known as its shadow fleet.
"They bought a whole bunch of tankers," said Browder. "Those tankers are moving the oil, and the Indians and the Chinese and the Indonesians are very happy to get that oil at a discount of normal price."
Browder told CBC News that Russia is making between $500 million and $1 billion US every day by selling oil.
