Russia scores more Hormuz upside with yet another US sanctions pass
THERE have many losers in the Hormuz crisis: the seafarers killed in attacks in the strait or stranded in the Arabian Gulf, Middle East Gulf energy producers who can’t get their exports out, Dubai tourism, consumers spending more on fuel, and importers paying higher container surcharges.
But there have also been numerous winners: tanker owners, the Panama Canal Authority, investors in the BWET exchange-traded fund, and Atlantic basin energy producers replacing lost MEG supply.
Among the big benefactors in the latter category is Russia.
The US has facilitated this upside by waiving sanctions on Russia for three months in a row, beginning on March 12.
The latest extension, announced by US Treasury Secretary Scott Bessent on Monday, runs through June 17.
Data on commodity prices, export volumes and freight rates highlights the rising profitability of the Russian export trade amid the ongoing conflict in the Middle East.
Russian volumes slightly higher, pricing much higher
Russia exported an average of 3.7m barrels per day of crude and condensate in March-April, according to data from Vortexa (excluding CPC and Kazakh blends). This was up 3% or 104,260 bpd versus the 2023-2025 average for these two months, despite recent attacks by Ukraine on Russian energy infrastructure.
The vast majority of Russian crude, as has been the case since the start of the war with Ukraine, is bound for India and China.
The far larger upside for Russia is on the pricing side.
The price of Russian Urals crude loaded in the Black Sea port of Novorossiysk between March 18 and Monday averaged $90.47 per barrel, up $54.30 per barrel or 67% year on year (y/y), according to data from Argus.
Urals loaded in the Baltic Sea port of Primorsk averaged $92.15 per barrel during the past two months, up $53.29 per barrel or 73%% y/y.
Russian ESPO blend loaded in the Pacific port of Kozmino averaged $94.27 per barrel between March 18-May 18, up $34.67 or 58% y/y.
The US has effectively abandoned the price cap on Russian crude, but the EU price cap remains in force. It was lowered from $60 per barrel to $47.60 per barrel on September 3, 2025, then lowered again to $44.10 per barrel on February 1.
During the past two months, the price of Urals crude has been double the EU price cap, yet there appears to be zero effect on Russian export volumes, given the increase versus previous years.
Russian freight premiums increase vs non-Russian baseline
The Hormuz crisis have also benefitted shipowners carrying Russian crude.
The freight for ESPO crude from Kozmino to North China was under $1 per barrel before the Russia-Ukraine war, and in the $2-$3 per barrel range thereafter — with two exceptions.
The first coincided with the sanctions by the outgoing Biden Administration in January 2025 that mainly targeted the Pacific shadow tanker fleet, which pushed freight on this route to a record of $8.12 per barrel that month, according to Argus data.
The second was the Hormuz crisis.
The Kozmino-North China freight rate spiked to $5.14 per barrel in the week ending April 2, more than double the rate in the last week of February, before hostilities began. In the week ending May 15, freight was at $4.13 per barrel, up 74% versus late February.
Meanwhile, freight rates for tankers loading Urals crude in Novorossiysk and Primorsk have surged in the wake of the Hormuz crisis, along with rates for tankers in other trades.
The difference is that rates for tankers in non-Russian trades have retreated more than in Russian trades, so the “sanctions premium” — the upside for shadow tankers* — has increased.
Argus assesses Russian freight versus a baseline — a comparable non-Russian trade — to determine the sanctions premium.
For the Novorossiysk-North China aframax route, Argus assessed Russian cargo freight at a 39% premium to the baseline in the last week of February, just before the Hormuz crisis.
In the week of March 27, the non-Russian baseline was 25% higher than the Russian trade, as mainstream aframaxes frantically loaded US cargoes to replace lost MEG supplies. At that point, it was better to be mainstream than shadow.
But in the latest week, ending May 15, the Novorossiysk-North China aframax freight was at $27.44 per barrel, up 61% versus late February, while the non-Russian benchmark freight was at $10.91 per barrel, down 11% versus late February.
The sanctions premium jumped to 151% in this trade in the latest week, or $16.53 per barrel.
The same pricing pattern is apparent in Novorossiysk-India freight, as well as in the Primorsk tanker trades to both North China and India.
Thus, the combination of the Hormuz crisis and US sanctions relief is primarily benefitting the shadow fleet — not mainstream tankers — on the shipping side.
Russian and mainstream markets ‘increasingly unlinked’
“I think the most interesting point about the sanctions premium is that the Russian-origin market and mainstream market have been coming increasingly unlinked,” John Ollett, editor of EMEA freight at Argus, told Lloyd’s List on Tuesday.
“The Russian market has responded directly to the US waiver on purchases of Russian crude and soared to new heights.
“Indian buying has slowed as the waiver approached expiration but it’s likely to rise again on the recent news that the US administration has issued another authorisation allowing purchases of Russian crude in floating storage, valid through June 17, and has signalled that sanctions relief could become more permanent for some buyers.
“You can see this very clearly reflected in the Russia-origin rates. The market soars on the initial rush of Indian demand, and then retreats slightly as that demand wanes.”
According to Ollett, “The fleet carrying Russian crude and the mainstream fleet have become increasingly independent of each other — tankers will not move between fleets — and this means that the two freight markets respond to mutually exclusive drivers, which is reflected in an increasingly erratic sanctions premium.
“One outcome of this is that the supply of ships capable of carrying Russian crude is largely fixed, which means that any increase in demand will lead to an immediate and sustained increase in freight rates. The waiver implemented by the US is an example of such a driver.
“Conversely, the mainstream fleet has followed a much more complicated dynamic. Freight rates soared to record highs in the early days of the US-Iran war. But now, ships that would have carried crude and clean products out of the MEG under normal circumstances and were not in the Gulf at the time have had enough time to diversify to other markets — swamping momentum there.”
This divergence also explains why the EU price cap has had little effect.
“Crossover between the Russian-crude-carrying fleet and the mainstream fleet has shrunk significantly,” said Ollett.
“The increasing risk of sanctions had already eroded this in recent months but mainstream shipowners are even more unwilling to trade in the Russian crude market in the current atmosphere as freight rates are at comparative highs, although significantly lower than the record rates seen in March and April.”
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