South Korea’s direct energy imports from Russia dropped in 2022 after the war started.
MOSCOW: Russian naphtha shipments to South Korea have slowed amid a probe by the country into whether fuel from Russia has been mislabelled as supply from places where cargoes have been transshipped, according to trade sources and shipping data.
The shift in buying by Asia’s top naphtha buyer, along with a crackdown by Greece on transshipments, means Russia will have to sell the petrochemical feedstock elsewhere or park cargoes in storage while facing price caps due to its war on Ukraine.
South Korea’s direct energy imports from Russia dropped in 2022 after the war started, but cheap Russian naphtha transferred from ships and storage tanks in the Mediterranean and Middle East started flowing to the US ally instead.
Transfers at countries such as Tunisia, Greece and United Arab Emirates’ Fujairah change the fuel’s origin. That has helped traders evade scrutiny from a G7 price cap imposed on Russian oil shipments using western shipping and insurance services to reduce Moscow’s funding for the Ukraine war.
During ship-to-ship transfers, different products can be blended with crude oil, making it hard to determine actual import volumes and the origin of each oil product, an official at a large Korean naphtha importer said.
So until April, it was convenient to buy transshipped cargoes or from storage without fretting about the actual origin of the products, the official said, declining to be named due to the sensitivity of the issue amid a government probe.
The rise of transshipped imports led South Korean authorities to start an investigation in March, looking into whether Russian supply was being mislabelled as fuel from elsewhere, multiple sources familiar with the matter had said.
Russian naphtha “flows have been drying out as buyers seem to be more cautious with the government crackdown,” said Armaan Ashraf, global head of natural gas liquids at energy consultancy FGE.
South Korean customs authorities did not respond to a request for comment on the investigation and Russian oil imports.
Shipments from the Laconian Gulf off southeastern Greece, a popular transhipment zone for Russian oil, to South Korea have plunged since April, while supply from the Middle East has increased, according to the sources and ship-tracking data from Kpler and LSEG. — Reuters
