Ukraine launches new tanker war

In this video, I discuss the Ukrainian attacks on Russian shadow fleet tankers in the Black Sea. Watch the video here or read the transcript below.

Best,
Anders

Transcript:

It has been a while since there have been dramatic developments in the maritime war in Ukraine, but over the last few days, something spectacular has indeed happened. Ukraine has started targeting Russian oil tankers with maritime drones, and this is something that could potentially have very big consequences. So let's talk about it.

What happened was that Ukraine initially struck two oil tankers belonging to the Russian Shadow Fleet that were heading towards Russian ports in the Black Sea. They carried out this attack with maritime drones, they documented it well, they took responsibility for it, and they published impressive videos that showed how this was done. So it's pretty clear what happened in these cases.

It occurred in what's called the Turkish exclusive economic zone. And it's very important not to confuse that with the idea of Turkish territorial waters. A country's exclusive economic zone means that this is international waters. It's just part of the international waters where this country has the rights to extract resources like fishing or oil drilling or those sorts of things. So, this happened in international waters.

These ships were heading towards Russia, so they were empty of cargo, and then they were going to be filled up in Russian ports to export that oil to countries that still buy Russian oil. And the ships were heavily damaged. It seems quite clear that they will not be transporting oil again anytime soon, at least not until they have undergone some very extensive repairs.

Then a couple of days later, another incident happened off the coast of Senegal, where another tanker was hit. It came straight from a Russian port, and then somewhat mysteriously, it exploded off the coast of Senegal. I've seen some speculation that it was also a drone attack, but I've not seen evidence of it. To me, it seems more likely that this was something else, like maybe limpet mines. In either case, it looks like Ukraine has struck three oil tankers linked to the export of oil from Russia within the last few days.

All this follows a period during which Ukraine has also increasingly targeted port facilities related to oil exports from Russia. There have been several strikes on important Russian oil terminals, and they have also struck oil tankers that were moored in those hobbos. So there's been a shift where, until recently, Ukraine mainly targeted Russian oil production facilities like refineries. This hampered Russian ability to refine oil products into diesel and gasoline and jet fuel and those kinds of things. But now they're also increasingly targeting Russia's ability to export crude oil to other countries.

All this targets Russia's revenues from selling oil. When Russia is unable to refine oil products themselves, they have more surplus crude oil that they need to sell off on the world market. And this means that they will have to offer a bigger discount to get rid of this surplus oil. And now Ukraine is introducing more uncertainty into that flow of oil by targeting the ships that are supposed to bring this oil to the buyers in India and China and other countries. So this all means that buyers now have greater uncertainty about Russia's ability to actually deliver what they promise. So all in all, this means that Russia has to sell Urals oil with a bigger and bigger discount. It might even at some point get to the point where they have to sell it at a loss because they can't just stop producing oil. It's complicated to stop drills that are already working. So it's something that potentially could hurt Russia's budget quite a lot.

But there are some other effects here that I think it's also important to talk about. It's not only hurting Russia's economy. It's also a huge embarrassment for Russia. We are already now seeing Russian military bloggers that start asking perfectly relevant questions like, where is the Black Sea Fleet in all this? Why are they not protecting these vessels heading for Russian ports? Why are they not protecting the maritime sea routes?

The answer is obviously that they are not doing that because they can't. It's too dangerous for them. If they attempted to do it, then they would just be targeted by the Ukrainian drones instead of the tankers. But that is, of course, hugely a very embarrassing answer for Russia, let's put it that way. This really exposes that Russia does not have the maritime power to actually control what's going on in the Black Sea.

Another important point is that this is something that could affect the world market. It can have real consequences in other countries beyond just Russia and Ukraine. It can, of course, mean higher oil prices if Russia is unable to export oil to the world. But it can also have consequences for shipping. Shipping is a very international business, so many countries can't be affected by that.

But perhaps most importantly, this can have huge consequences if Russia decides to retaliate against ships coming from Ukrainian ports, because these ships will mostly be transporting grain to the world market. This could potentially lead to a shortage of food in some areas of the world and higher food prices globally if Russia retaliates against ships to and from Ukrainian ports. And they might do that, because what else are they going to do? As I said, the Russians are not really able to protect their own shipping routes. So what they can do instead is they can retaliate in kind against the Ukrainians.

This is something that would, of course, hurt the Ukrainian economy if they are unable to export grain. But frankly, I'm not sure Ukraine would necessarily mind all that much because it would propel this conflict back onto the top of the global agenda at a time when it seems that many countries are beginning to act as if the war in Ukraine is a contained issue. There's growing pressure on Ukraine, and increasingly, Ukraine is struggling to find countries that are willing to support the war because people are beginning to say that, "well, maybe it's too expensive. We can't afford to do this in the long run."

So it might not be all that bad for Ukraine if some of these countries get a reminder that Ukraine is actually quite important for their domestic economy and for the prices that consumers all over the world pay in the grocery stores.

It's something that could regenerate some of that global attention on making negotiations that maybe would be more beneficial than what's currently happening in Washington. The Americans keep coming out with one big peace plan after another, and they all seem very unfavorable to Ukraine. But if Russia starts going after the grain transports, then maybe some of that attention could be transformed into discussions about smaller deals, like a new grain deal.

That could be beneficial for Ukraine, because obviously, it would also mean that Ukraine would need to get something out of stopping those attacks on Russian shipping. They're not just going to do it without getting something in return.

So overall, I think there are some quite significant perspectives in what just happened in the Black Sea, and that this outcome could potentially be quite big now that Ukraine has started to target Russian shadow fleet vessels with naval drones. In the short term, it can obviously put a lot of pressure on the Russian economy. But if Russia retaliates by targeting Ukrainian shipping, then it could reinvigorate the international attention on the war in a way that favors Ukraine as the world community would mostly be angry at Russia for jeopardizing food security.

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