Western Sanctions Take Big Bite Out of Sovcomflot’s Results
Russia’s tanker operator PAO Sovcomflot is citing the impact of the Western sanctions on the company’s results. It reported a significant drop in revenues and a loss for the first quarter of 2025 along with recording a non-cash impairment related to the fleet.
The U.S., UK, and EU have all stepped up their efforts targeting the shadow tanker fleet and Russia’s income from the oil and gas sectors. In announcing its financial results the company cited the impact and warned investors that the board of directors would be taking into account “significant changes in the external business conditions that have a direct impact on the current financial performance of the company” as it considers dividends. They said future decisions would be guided by the principle of capital adequacy.
Sovcomflot has previously acknowledged the sanctions, which it calls illegal, and early on after the start of the sanctions regime took steps selling ships and moving management to Dubai and elsewhere. It was also moving ships to registries such as Gabon but later flag hopping. Some returned to the Russian registry.
In today’s financial announcement, the company acknowledged that some vessels are now idled by the sanction. During the first quarter, it took a non-cash impairment charge of $322 million against the value of the fleet.
“During the reporting period, unprecedented sanctions were imposed on the company and its vessels, which created additional commercial and operational difficulties in the operation of the fleet,” the company writes in its results announcement. “The company continues to work systematically to minimize the negative impact of sanctions restrictions on its activities, consistently adhering to high standards of maritime safety and the quality of maritime operations.”
Despite the efforts, the company reported first quarter revenues were down by nearly a third (30 percent) to $278 million versus the previous quarter, or nearly by half versus the first quarter of 2024. Earnings were down 45 percent (EBITDA) versus last quarter driving the company’s bottom line to a loss of $104 million in the first quarter of 2025.
“Despite these events, the company's business model demonstrates high stability due to the portfolio of existing long-term contracts and a diversified fleet structure,” Sovcomflot states in its report. It says the company has sufficient cash liquidity and a balanced capital structure that also allows it to maintain a stable financial position.
Both the UK and EU vowed this month to further increase the pressure on the Russian oil sector in an effort to reduce revenues and support to the Russian economy. The EU noted it doubled the number of tankers it had sanctioned to over 300 vessels while the UK added another 100 to its listing. The UK also said it was in discussion with Western allies about lowering the price cap the G7 imposed on the sale of Russian oil. The EU has pledged to make an effort to end its imports of Russian gas giving countries the tools to break long-standing contracts and dramatically reduce imports by 2027. The EU has pledged to break free of its Russian imports.