Russian Tankers Sink in Black Sea, US Warns on 'Dark Fleet'

Two Russian tankers were seriously damaged in the Kerch Strait near the Black Sea on Sunday, spilling a large volume of oil and causing an emergency rescue.

A video showing one of the vessels, which had broken in two after it ran aground in bad weather, was posted on a Russian news site.

Tass news agency reported details from the Emergency Situations Ministry, which said one crew member died on the Volgoneft-212 tanker, but a rescue operation managed to save the 12 other crew members on board before it sank.

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A second tanker, the Volgoneft-239, with 14 crew members, was also damaged after running aground 80 metres from Taman port in Russia’s Krasnodar region, the ministry said.

Tass said the two vessels were carrying close to 9,000 tonnes of a low-grade fuel oil known as mazut.

The Kerch Strait is a key shipping route between the Russian-occupied Crimean Peninsula and Russia, which allow vessels to journey from the Sea of Azov to the Black Sea.

It has been a scene of conflict between Russian and Ukraine, since it was seized by Russian forces 10 years ago.

Sanctions on ‘dark’ Russian tankers still possible

In related news, US Treasury Secretary Janet Yellen said on Friday that the US is looking at further sanctions on “dark fleet” tankers, which are usually much larger than the two vessels that got into trouble on Sunday.

And she did not rule out sanctions on Chinese banks as Treasury seeks to reduce Russia’s oil revenue.

Yellen told Reuters that the US and its allies also could consider lowering their $60-per-barrel oil price cap on Russian oil, which prohibits Western insurance and maritime services on cargoes above that level.

The Treasury has already sanctioned individual tankers and their owners for operating above the price cap and can do more in this area, Yellen added, suggesting additional measures in the five weeks before she leaves office.

“There are a number of possibilities here. We don’t preview sanctions, but we’re always looking at oil revenues and if we can find ways to further impair Russian oil revenues, that would, I think, strengthen Ukraine’s hand. That remains on our list,” Yellen said.

Last week, Yellen said softness in the oil market presents an opportunity for more sanctions. Benchmark Brent crude traded at $74.50 per barrel on Friday, down from $85.57 when the $60 cap was set in December 2022.

Backing Ukraine before Trump takes office

President Joe Biden’s administration has been racing to shore up support for Ukraine before President-elect Donald Trump takes office on January 20, given the Republican leader’s frequent complaints about the cost of US support for Ukraine.

Yellen said Treasury officials continue to talk with their Chinese counterparts on efforts to detect financial institution activity that could be aiding transactions related to Russia’s war effort.

“I absolutely would not rule out the possibility we would sanction an individual bank if we had the necessary level of … evidence to be able to put sanctions on,” she said. “But we also do have a channel where we’ve been able to discuss specific concerns, and sometimes that could be adequate as well.”

She said warnings to larger Chinese banks have been successful, making them “very wary” of sanctions that would cut them off from dollar-based transactions. In an executive order about a year ago, Biden gave Treasury the authority to levy secondary sanctions on financial institutions that facilitate war-related transactions.

As Russia’s economy becomes more dominated by military production, it is becoming harder to distinguish between strictly commercial and war-related deals.

“Authorities in China recognize that our use of these sanctions would be a serious threat with very adverse consequences,” Yellen said. “They want to trade with Russia, but they do not want their banks sanctioned.”

US-China financial meet in Tianjin

Yellen said the final meeting of the US-China Financial Working Group will take place this week in the northeast Chinese city of Tianjin, but sanctions were not likely be a major feature. Instead, it will focus on financial stability issues, including “table-top” exercises on how to deal with potential financial crises.

Yellen said it was important for the Trump administration to have open channels of communications with China, adding: “I think you can’t just have leader-to-leader meetings. The relationship has to be developed at a senior official staff level, and we’ve worked constructively on a lot of things.”

While the dialogue has not changed China’s state-led, export-driven economic model, it has allowed the US to explain actions like application of steep tariffs on electric vehicles.

Asked about a report this week that Beijing is considering weakening its yuan currency to counteract Trump’s tariff plans, Yellen said China in recent years has been doing “the exact opposite,” pushing up the yuan’s value against the dollar.

That assessment was detailed in Treasury’s most recent semi-annual currency report, which found no manipulation by major US trading partners.

She declined to comment on Beijing’s specific currency plans, but said the US Treasury has tools to react strongly to address currency manipulation. Bessent is expected to oversee the Treasury’s next currency report, which is due in April.

“I’m not going to be here, but my guess is that Treasury will continue to push back if it thought that there was currency manipulation,” Yellen said.

Peter Navarro, who is Trump’s designated White House trade adviser, told Reuters on Friday that Trump’s Treasury Department would not look “fondly” on any attempts by US trading partners to manipulate their currencies.