North Korean tankers stay away from Russia, two months after OFAC sanctions
Tankers that normally visit China also go quiet, indicating possible supply issue
North Korea appears to be without Russian oil supplies, over two months on from a U.S. designation targeting the country’s Moscow-based supplier, analysis of the DPRK’s tanker positions shows.
DPRK traffic at a Vladivostok oil facility came to a halt shortly before the Department of Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the Moscow-based Independent Petroleum Company (IPC) on June 2.
The Vladivostok terminal is owned by Alliance Oil, an IPC subsidiary that also appeared on OFAC’s list of sanctioned entities.
“OFAC designated the Independent Petroleum Company (IPC) pursuant to E.O. 13722,” OFAC said in a press release issued at the time. “IPC is a Russian company that has signed a contract to provide oil to North Korea and reportedly has shipped over $1 million worth of petroleum products to North Korea.”
“IPC also may have been involved in circumventing North Korean sanctions. OFAC also designated one of IPC’s subsidiaries, AO NNK-Primornefteproduct.”
A previous NK Pro report indicated that several of the North’s tankers were waiting near the terminal as its owners were designated, but appeared to leave empty handed.
The designation so far appears to have been enough to keep the fuel haulers away from the Russian Far East. The NK Pro ship tracker indicates the tankers have not returned to the area in the intervening two months and were last seen heading southwest towards the DPRK.
The tankers have since disappeared from tracking systems, indicating they are held in North Korean ports were tracking covering is patchy, or they are traveling without their locations transponders activated, an unsafe and generally illegal practice.
While Russia’s trade figures appear to include relatively low amounts of exported oil products, prior to IPC’s designation North Korean tankers were a common sight at Vladivostok facility.
The DPRK’s ships have visited other oil terminals in the region in the past, both in Nakhodka and Primorsky Kray, which are much closer to the North Korean border.
But with the threat of OFAC designations looming, it’s unclear if other businesses – in Russia or elsewhere – are lining up to take IPC’s place.
The DPRK could also be facing similar supply blips on the other side of the Peninsula, with many of the country’s tankers seemingly shelved potentially spelling trouble for the North’s seaborne oil flows.
In recent years, the DPRK has allocated most of its tanker fleet to Russian terminals, with the remainder ferrying fuels between Chinese ports and the North’s Nampho oil terminal on the country’s west coast.
North Korea has no domestic oil production of its own and has historically been reliant on China and Russia for its crude oil and fuels.
But vessel tracking information indicates the tankers running the Chinese routes have also gone quiet, with minimal traffic to Dalian, formerly a regular source of oil products for North Korea.
The last tanker to broadcast its location did so in late July, heading southwards. Tankers typically following that course from Nampho head to either a privately owned oil terminal near Shanghai, or sail around the Korean peninsula towards Rason or Russia.
Reuters previously reported that China may have suspended its fuel sales to the DPRK in May or June. But tankers continued to visit Chinese ports until July, while Beijing continued to announce gasoline and diesel sales to the DPRK in both months.
Nonetheless, the reduced tanker activity on both sides of the peninsula indicates potentially lower levels of oil products flowing into North Korea when compared with previous years.
But questions remain over how much crude oil Beijing is sending to North Korea via a pipeline at Dandong. China stopped reporting the shipments in late 2013, and it’s unclear if the North’s Pongwha Chemical complex can refine enough gasoline and diesel to keep with the DPRK’s growing fuel demands.
“Assuming ongoing imports of crude oil for Ponghwa of 500,000 tonnes per year, this means that about half of a ‘normal’ (as of 2010) level of gasoline and diesel fuel use can be sustained just from the Ponghwa’s refinery’s outputs,” David Von Hippel, a senior researcher at the Nautilus Institute for Security and Sustainability, told NK Pro.
“If tankers continue to be idle, within a few months one would expect to see some combination of higher prices and/or rationing, and less traffic resulting from lower availability or higher prices.”
According to NK Pro’s Pyongyang fuel price index, the cost of both gasoline and diesel remains high compared to the first quarter of the year. Prices at the pump spiked sharply in late April, and have yet to fall back towards their 2016 levels.
But gauging the state of North Korea’s oil supplies and stockpiles from consumer prices is challenging, as the mechanics of the DPRK’s fuel distribution networks remain occluded.
“Remember that not all end-users of gasoline and diesel in the DPRK are created equal–some will have privileged access to fuels relative to others, and thus some end-users (non-elites, non-military, for example) will be affected much earlier than others,” Von Hippel added.
Edited by Oliver Hotham
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