Baltic Sea

Don’t play Russian roulette with oil in the Baltic Sea

Dozens of oil tankers cross the narrow waterway every day. It is a hub of world trade. Turn it off and gas prices are going up everywhere. At the moment, geopolitical tensions are high and the navies of many major powers have warships patrolling.

If you think we’re talking about Iran and the Strait of Hormuz, you’re not remotely close.

No – welcome to the frigid waters of the Danish Straits, the narrow waterway overlooked by Copenhagen that connects the Baltic Sea to the North Sea and the open waters of the Atlantic Ocean. They matter now because they are a major conduit for Russian crude and refined oil products into global markets, making them a bottleneck for Kremlin finances.

This is where geography, history and politics meet.

The strait, which is only four kilometers wide at one point, is in danger of becoming embroiled in a tussle between the US and Europe on one side and Russia on the other.

In early December, new European Union rules will make the provision of maritime services illegal for anyone exporting Russian crude — even to third countries. But the straits are a difficult passage: storms are commonplace, the water is shallow, the coast is rocky and submerged sandbars often move with the currents, unexpectedly reducing the draft. For this reason, the Danish government and the International Maritime Organization of the United Nations strongly recommend – although they do not require it – every ship, especially oil tankers, to hire a Danish pilot for the crossing.

In theory, the new rules could prevent Danish pilots from boarding tankers full of Russian crude oil and perhaps prevent them from sailing the high seas. In Washington, officials have tacitly cited this risk as a reason why third countries — say China and India — should accept the G7 oil price cap on Russian oil so they can continue using the pilots. The reality is a little more complicated. To understand it, one has to delve into history, beginning with the ‘Treaty of Collection of Sound Dues’ signed in Copenhagen in 1857, which to this day regulates navigation through the straits. It states that Denmark is to “supervise” the pilotage service through the straits, which Danish officials say creates an obligation to provide the service. I asked the Danish Maritime Authority if EU sanctions will ban the provision of pilots for tankers full of Russian oil. An emailed statement said: “Ships enjoy the right of innocent passage through the Danish Straits as defined by international law. In addition, Denmark is obliged to provide pilotage for ships in innocent passage.” “Vessels are not obliged to use pilotage services when exercising the right of innocent passage,” it added, but insisted that both the Both the Danish government and the The IMO, to which Russia has belonged since 1958, “strongly recommends” the use of pilotage services. seas.”

Copenhagen may eventually reconsider its position, but its current approach seems correct. Using the pilotage service to try to set up a de facto blockade of Russian oil exports would be wrong – and dangerous. European and US officials are rightly trying to choke off Russian oil revenues. Oil exports are funding President Vladimir Putin’s invasion of Ukraine and helping him maintain local support for his regime. But there are other and better ways to achieve this goal without jeopardizing maritime safety. The EU sanctions package preventing buyers of Russian oil from using Europe’s financial sector and its oil tankers is on the right track. As with the ships carrying sanctioned Iranian and Venezuelan crude, Russian oil is increasingly moving into the world’s ghost fleet — rusting old tankers flagged in countries with little appetite for safety inspections and increasingly insured by dubious newly created operations. The owners are opaque shell companies. Crews are poorly paid and often untrained. If Copenhagen denied pilotage to Russian oil tankers, the ships could still navigate the straits and exercise their international right of innocent passage, but with a much greater risk of collision or, worse, even an oil spill.

Retiring pilotage in the dangerous waters of the Straits is playing, ahem, Russian roulette. The last thing we need to add to the already high cost – in lives and property – of the Russian invasion of Ukraine is something like the Exxon Valdez disaster in the Baltics.

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• Winter reality collapses for EU leaders: Lionel Laurent

• Putin tears a huge hole in a German balance sheet: Chris Bryant

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. A former reporter for Bloomberg News and commodities editor for the Financial Times, he is a co-author of The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources.

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