Since the onset of Russia’s war in Ukraine, Western nations have imposed extensive economic penalties, particularly targeting Moscow’s lucrative oil sales. As Europe rolls out its 19th round of sanctions, a troubling reality has become undeniable: Russia has successfully circumvented these measures.
The Kremlin swiftly devised a strategy to continue profiting from oil despite price caps and import bans. This involved assembling an enormous ‘shadow fleet’ — a collection of aging, often poorly maintained ships operating under obscured ownership. These vessels clandestinely transport Russian fuel to distant markets, effectively undermining the sanctions’ intended impact and ensuring a steady flow of revenue.
The rapid expansion of this shadow fleet is now revealing serious and potentially enduring consequences. These decrepit ships represent a grave environmental threat, and their proliferation has fostered a sprawling illicit shipping industry. Experts are concerned this underground economy could persist long after the current conflict, potentially allowing other nations, like Iran, to follow suit, with major consumers such as China and India as key partners.
Ian Ralby, a prominent expert in maritime security and the founder of I.R. Consilium, noted, ‘Many desire the straightforward path of imposing sanctions, but we’ve inadvertently created a larger problem. Sanctions haven’t put them out of business; they’ve pushed them out of legitimate business.’
According to S&P Global Market Intelligence, the shadow fleet currently comprises approximately 17 percent of all active oil tankers globally. Earlier this year, this amounted to 940 ships, marking a 45 percent increase from the previous year’s figures.
While some vessels with questionable ownership and shipping practices existed prior to Russia’s full-scale invasion of Ukraine in February 2022, their numbers surged dramatically once the conflict began.
By late 2022, Europe’s ban on Russian seaborne oil imports forced Russia to redirect its sales to buyers in India and China. These longer voyages necessitated a larger number of ships to maintain supply chains.
Russia was also keen to bypass the imposed oil price cap. The Group of Seven, the European Union, and Australia had introduced restrictions preventing companies from providing insurance and other vital services for Russian crude oil sold above $60 per barrel—a threshold that the EU and Britain have since lowered even further.
In response, Russian-affiliated ships began operating with unreliable or no insurance. They adopted flags of convenience from third-party countries and transmitted false location data to obscure their cargo loading points.
This deliberate obfuscation created a veneer of plausible deniability, making it exceedingly difficult for oil buyers to ascertain the true origin of their shipments.
Beyond economic evasion, the reliance on these ships for Russia’s oil trade introduces a heightened risk of environmental disasters. S&P data reveals that the average age of these shadow vessels is around 20 years, significantly older than the broader oil tanker fleet’s average of 13 years.
Natalia Gozak, the office director of Greenpeace Ukraine, warned that ‘the combination of a lack of insurance and extremely old vessels drastically increases the potential for environmental catastrophe.’
The threat extends beyond environmental damage. There is growing suspicion that these clandestine ships may be involved in underwater sabotage, targeting pipelines or communication cables and attempting to disguise these acts as accidents.
The most evident downside of the shadow fleet is its direct impact on sanctions. A recent report by America’s Government Accountability Office concluded that it has ‘limited the cap’s efficacy,’ allowing Moscow to continue funding its war efforts in Ukraine.
However, proponents argue that the sanctions are not a failure. Ben Harris, a former Biden administration Treasury official instrumental in designing the price cap, emphasized that even imperfect sanctions impose significant costs on Russia. The logistics and maintenance of a shadow fleet, along with longer shipping routes to India and China, are expensive endeavors.
‘The real challenge lies in enforcement,’ Harris stated.
In an ongoing effort, international bodies are intensifying sanctions against the shadow fleet. The European Union has blacklisted over 500 such ships, making ports wary of accepting them. The United States, Britain, Canada, and Australia are also pursuing similar actions, aiming to isolate these vessels within the global maritime community.
Yet, Russia continues to replenish its fleet, replacing blacklisted ships as quickly as they are identified.
David O’Sullivan, the E.U. sanctions envoy, likened the situation to a game of ‘Whac-A-Mole,’ acknowledging the persistent challenge of circumvention.
Nevertheless, Russia bears the financial burden of acquiring these new vessels.
‘Everything we have done forces them to incur much greater costs,’ Mr. O’Sullivan affirmed.
However, this remains an imperfect solution. Shadow fleet ships employ various tactics to bypass blacklisting, including offloading cargo at sea and ‘flag hopping’—frequently changing their vessel registrations to conceal their true identities.
As Mr. Ralby cautioned, the West’s current approach inadvertently incentivizes Russia to cultivate a vast, illegal economic apparatus.
Despite these challenges, government officials maintain that simply doing nothing is not a viable alternative.