Since the early days of Russia’s war in Ukraine, Western nations have imposed economic sanctions designed to cripple Moscow’s oil revenues. However, as Europe rolls out its 19th round of restrictions, an uncomfortable truth has emerged.
Russia swiftly developed a clever strategy to circumvent these measures, establishing a vast ‘shadow fleet’ of aging vessels with opaque ownership. These ships clandestinely transport Russian oil to distant buyers, allowing the country to continue profiting despite international price caps and import bans.
This burgeoning shadow fleet, however, carries significant and potentially enduring consequences. These decrepit ships represent a grave environmental hazard. Furthermore, this trend has fostered a massive illicit shipping industry that some analysts fear may persist long after the conflict concludes. Such a development could empower nations like Russia and Iran to bypass established global norms, with major consumers like China and India acting as primary customers.
“A lot of people want to do the easy part — impose sanctions — but we’ve actually caused a bigger problem,” noted Ian Ralby, a maritime security expert and founder of the research firm I.R. Consilium. “The sanctions don’t put them out of legitimate business; they simply push them out of legitimate business.”
According to S&P Global Market Intelligence, this shadow fleet now comprises about 17 percent of all operational oil tankers worldwide. Earlier this year, the fleet numbered 940 vessels, marking a 45 percent increase from the previous year’s figures.
While some questionable shipping practices existed before Russia’s full-scale invasion of Ukraine in February 2022, they proliferated dramatically after the conflict began.
By late that year, Europe had banned Russian seaborne oil imports, forcing Russia to seek new buyers in India and China. With its vessels now needing to undertake longer voyages to these more distant ports, Russia required a larger fleet.
Additionally, Russia aimed to evade a Western price cap. The Group of 7 nations, the European Union, and Australia had imposed restrictions preventing companies from providing insurance and other services for Russian crude oil sold above $60 a barrel, a limit that the European Union and Britain have since lowered even further.
Consequently, ships associated with Russia began operating with dubious or no insurance. They adopted flags from third countries and transmitted false location data to obscure their cargo’s origin. This practice created a veneer of plausible deniability for oil purchasers.
As these vessels became crucial to Russia’s oil economy, they simultaneously heightened the risk of oil spills and other maritime catastrophes. The average age of these shadow fleet ships is approximately 20 years, significantly older than the broader oil fleet’s average of 13 years, based on S&P data.
“Lack of insurance combined with really old vessels — this just increases the risk of environmental catastrophe,” warned Natalia Gozak, office director of Greenpeace Ukraine.
Environmental hazards are not the only concern. There have been suspicions of clandestine ships engaging in underwater sabotage, such as striking pipelines or cables, and making these incidents appear accidental.
Another clear disadvantage of the shadow fleet is its impact on sanctions. America’s Government Accountability Office concluded in a recent report that the fleet has “limited the cap’s efficacy,” ensuring a continued flow of funds into Moscow’s coffers and sustaining its war efforts in Ukraine.
However, supporters argue that the sanctions are not a mistake. Ben Harris, a former Biden administration Treasury official and one of the architects of the price cap, emphasized that even if imperfect, the sanctions impose costs on Russia. Shipping oil to India or China and maintaining the shadow fleet is expensive.
“Enforcement is the real challenge,” he stated.
For now, nations are intensifying their sanctions to counter the shadow fleet. The European Union has added over 500 shadow-fleet ships to its sanction lists in its latest announcement, making ports increasingly hesitant to work with them. The United States, Britain, Canada, and Australia are also targeting these vessels, aiming to turn them into maritime outcasts.
Yet, Russia continues to procure new vessels to replace those targeted by sanctions. “You have this dreadful expression in America: Whac-A-Mole,” said David O’Sullivan, the E.U. sanctions envoy. “Circumvention is a bit like that.”
Nonetheless, Russia must bear the costs of these new ships. “Everything we have done ends up costing them a lot more,” Mr. O’Sullivan reiterated.
Despite this, it remains an imperfect solution. Shadow fleet ships have developed strategies to evade blacklisting, including offloading cargo at sea or engaging in “flag hopping,” where they frequently change their registrations to conceal their true identities.
Meanwhile, as Mr. Ralby cautioned, the West’s actions are inadvertently pushing Russia to cultivate a vast illegal economy. However, government officials maintain that inaction is simply not an option.