The recent tightening of sanctions enforcement on Iranian and Russian oil by the US and EU may lead to notable shifts in global tanker trade patterns. On Wednesday, July 30, the U.S. Department of the Treasury announced sanctions targeting over 100 Iran-linked individuals, companies, and vessels involved in the export of Iranian oil and petrochemicals.

Separately, the U.S. has expressed concerns over India’s continued purchases of Russian oil and defence equipment, raising the possibility of trade-related penalties, including a proposed 25% tariff on Indian goods.

Earlier, on July 18, the European Union adopted its 18th sanctions package against Russia, which revised the price cap on Russian crude from a fixed $60 per barrel to $47.6 per barrel, effective from September 3. Notably, the U.S.—a participant in the original G7 price cap—has not formally endorsed the EU’s updated cap.

In addition, the EU has introduced a ban on the import of refined products made from Russian crude processed in third countries, with exemptions granted to Canada, Norway, the U.S., the UK, and Switzerland.

While these actions reflect a stepped-up effort to curb Iranian and Russian oil revenues, there appears to be limited alignment in their strategies. The EU remains focused on constraining Russia’s energy income, whereas the U.S. is pursuing broader geopolitical objectives, including trade leverage and renewed diplomatic engagement with Iran.

Previous rounds of sanctions on Russian, Iranian, and Venezuelan crude have led to the emergence of a parallel market for transporting sanctioned oil. Despite an expanding list of sanctioned vessels and the G7 price cap mechanism, Russian crude continues to reach select buyers. Likewise, Iranian oil has steadily flowed to Asian markets, even with U.S. sanctions in place since 2019. Going forward, it will be important to observe how the latest wave of sanctions on Russian and Iranian oil influences the dynamics of the tanker market.

Impact of US penalty on Indian goods for buying Russian oil
Although the US has not specified the penalty for buying Russian oil, any significant penalty might discourage India to buy Russian oil and look for alternate supply. India is one of the major buyers of Russian oil and most of this trade is done on Suezmax and Aframax tankers. However, any possible decline in India’s imports of Russian crude will lead to a significant increase in the country’s imports from other sources, especially the Middle East. In such a situation, the VLCC demand will increase at the expense of mid-size tankers as the former dominate the loadings in Arabian Gulf.

Impact of tightening US sanctions on Iranian oil
Despite the US sanctions since 2019, Iran has managed to sell its crude in the international market using dark vessels. Nonetheless, the recent imposition of US sanctions on Iran-linked individuals, companies and vessels involved Iranian crude exports is likely to disrupt the supply chain of the Iranian crude in the short-term. However, any possible influx of non-sanctioned vessels into grey trade will squeeze the tonnage supply for the normal trade, supporting rates. However, any possible decline in the overall exports of Iranian crude due to these sanctions will not have any major impact on the global oil trade and tanker demand as the oil market is already oversupplied and other Middle Eastern producers can easily replace the lost Iranian barrels.

Impact of lower price cap on Russian crude
The recent 18th package of EU sanctions on Russia has significantly lowered the price cap from $60 to $47.6 per barrel, which will make it extremely difficult for Russia to use the mainstream international fleet for the transportation of its crude as Urals is unlikely to trade below such a low-price cap. Earlier, whenever Urals tend to trade below the price cap (especially in the low price environment), mainstream fleet, especially from Greek owners, used to carry the Russian cargo. However, for selling Urals above the new price cap, Russia will need to expand the parallel fleet (normally called dark/grey fleet).
Figure 1: Brent vs Urals price

Source: Drewry Maritime Research

Meanwhile, the growing list of the US and EU sanctioned vessels also signals that sanctioned countries such as Russia and Iran might acquire more non-sanctioned vessels in order to facilitate their trade. Any possible increase in the parallel fleet to bypass sanctions will thus squeeze the tonnage supply in the mainstream market, supporting the charter rates.
Figure 2: Secondhand transactions of crude tankers

Source: Drewry Maritime Research

There was a sharp spike in sale and purchase activity in 2022, particularly for vessels older than 15 years, as numerous opaque or previously unknown buyers entered the market to acquire tonnage for transporting Russian crude. This surge in demand for aging vessels underpinned secondhand asset values in the crude tanker market. Furthermore, the elevated demand contributed to a noticeable decline in demolition activity between 2022 and 2024, as older ships remained in service. In this current context, any renewed interest in vintage tonnage following the recent rounds of sanctions on Russia and Iran could once again provide a floor to softening asset prices in the secondhand market.
Source: Drewry