Since the very start of Russia’s war with Ukraine, Western nations have relentlessly imposed economic penalties, specifically designed to choke off Moscow’s substantial oil profits. Yet, as Europe gears up for its nineteenth round of these restrictions, a rather uncomfortable truth has come to light.
Russia, with remarkable speed, devised a cunning workaround to continue profiting from its oil, skillfully navigating around price caps and import bans. By assembling a colossal fleet of aging, often poorly maintained vessels with opaque ownership, Russia has been secretly ferrying its fuel to distant markets, effectively sidestepping sanctions and keeping its revenue streams flowing.
Now, the far-reaching consequences of this rapidly expanded shadow fleet are becoming alarmingly clear. These decrepit ships pose severe environmental hazards, and their proliferation has fueled a massive illicit shipping economy. Experts fear this dark network could persist long after the war ends, allowing nations like Russia and Iran to continuously flout established international norms, with major global consumers like China and India acting as key customers.
“Many are eager to implement the easy part — imposing sanctions — but we’ve inadvertently created a much larger problem,” warns Ian Ralby, a prominent maritime security expert and founder of the research firm I.R. Consilium. “The sanctions aren’t putting them out of business; they’re simply pushing them out of *legitimate* business.”
According to S&P Global Market Intelligence, a leading research firm, this shadow fleet now comprises an estimated 17 percent of all active oil tankers worldwide. Earlier this year, the fleet stood at 940 ships, marking a staggering 45 percent increase from the previous year.
While vessels with questionable ownership and shipping practices existed before Russia’s full-scale invasion of Ukraine in February 2022, their numbers skyrocketed once the conflict began.
By late 2022, Europe had completely outlawed Russian seaborne oil imports, forcing Russia to seek new buyers in India and China. With its existing ships tied up on longer voyages to these more distant ports, Russia urgently needed to expand its fleet.
Russia was also determined to circumvent an international price cap. The Group of 7, the European Union, and Australia had collectively restricted companies from providing insurance and other vital services if Russian crude oil was sold above $60 a barrel, a threshold that the European Union and Britain have since lowered even further.
Consequently, ships associated with Russia began operating with dubious or no insurance at all. They started flying the flags of third countries and transmitting false location data to obscure their cargo origins.
By making it nearly impossible to ascertain if oil originated from Russia, they effectively offered a veil of plausible deniability for potential oil buyers.
As these shadowy ships have become indispensable to Russia’s oil economy, they have simultaneously amplified the risk of catastrophic oil spills and other maritime disasters. The average age of these vessels is approximately 20 years, based on S&P data, significantly older than the broader oil tanker fleet’s average of 13 years.
“The absence of proper insurance coupled with these incredibly old vessels dramatically increases the potential for environmental catastrophe,” states Natalia Gozak, office director of Greenpeace Ukraine.
Moreover, environmental peril isn’t the sole threat. These clandestine vessels have been implicated in underwater sabotage, suspected of damaging pipelines or cables and then masking these incidents as accidents.
The shadow fleet also brings an even more obvious detriment. It has “limited the cap’s effectiveness,” as America’s Government Accountability Office concluded in a recent report this month. This ongoing operation ensures that money continues to flow into Moscow’s treasury, directly funding its war efforts in Ukraine.
However, proponents argue that the sanctions, though imperfect, are not a mistake. Ben Harris, a former Biden administration Treasury official and a key architect of the price cap, emphasizes that these restrictions do, in fact, impose significant costs on Russia. Shipping oil to India or China, and continually building and maintaining this shadow fleet, is an expensive endeavor.
“The true challenge lies in enforcement,” he noted.
Currently, several countries are implementing even more stringent sanctions to combat the shadow fleet. The European Union has blacklisted over 500 shadow-fleet ships in its latest announcement, making ports increasingly wary of working with them. The United States, Britain, Canada, and Australia are also actively targeting these vessels. The overarching goal is to effectively brand these ships as outcasts of the sea.
Yet, Russia persistently adds new vessels to replace those that are blacklisted. “It’s a bit like playing Whac-A-Mole,” says David O’Sullivan, the E.U. sanctions envoy. “Circumvention is precisely that.”
Despite the challenges, Russia is forced to bear the costs for these new additions. “Everything we’ve done ultimately makes things much more expensive for them,” Mr. O’Sullivan affirmed.
Nonetheless, it remains an imperfect solution. Shadow fleet ships have developed intricate methods to bypass blacklisting. They offload cargo at sea to avoid detection or engage in “flag hopping,” continually changing 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 global economy. Despite this, government officials maintain that the alternative – inaction – is simply not an option.