Since the very beginning of Russia’s war against Ukraine, Western nations have imposed strict economic sanctions, specifically targeting Russia’s lucrative oil exports to cripple its wartime finances. However, as Europe prepares to roll out its nineteenth package of these penalties, an unsettling truth has emerged about their effectiveness.
Instead of being deterred, Russia swiftly devised a clever strategy to continue profiting from its oil, circumventing both price caps and import bans. Moscow achieved this by assembling a massive ‘shadow fleet’ – a collection of aging, often poorly maintained vessels with opaque ownership – which discreetly transports Russian fuel to distant international markets, effectively turning a profit despite the restrictions.
The rapid growth of this shadowy maritime operation is now revealing serious, potentially enduring consequences. These decrepit ships are not only a ticking time bomb for environmental disasters but have also fostered a vast, underground shipping network. Experts fear this illicit economy could persist long after the war concludes, setting a dangerous precedent where countries like Russia and Iran act as primary shippers, with China and India remaining key customers, thus undermining established international norms.
Ian Ralby, a prominent maritime security expert and founder of I.R. Consilium, argues that while imposing sanctions might seem straightforward, the West has inadvertently created a larger issue. He explains, “The sanctions don’t put them out of business. They put them out of legitimate business,” suggesting that these measures merely push Russian oil operations into the shadows rather than stopping them entirely.
This covert fleet now represents a staggering 17 percent of all active oil tankers globally, according to analyses by S&P Global Market Intelligence. Earlier this year, the fleet comprised 940 vessels, marking a substantial 45 percent increase from the previous year, highlighting its rapid expansion.
While a small number of vessels with questionable ownership and shipping methods existed prior to Russia’s full-scale invasion of Ukraine in February 2022, their prevalence skyrocketed dramatically following the outbreak of hostilities.
By late 2022, when Europe enacted a ban on Russian seaborne oil, Russia urgently needed new buyers like India and China. The longer routes to these distant markets meant Russia’s existing ships were occupied for extended periods, necessitating a larger fleet to maintain its export volume.
Additionally, Russia aimed to bypass the international price cap imposed by the Group of 7, the European Union, and Australia. These nations had prohibited their companies from offering insurance and other crucial services for Russian crude oil sold above $60 a barrel, a threshold that the EU and Britain have since lowered even further.
In response, Russian-affiliated ships started operating with unreliable insurance, or often none at all. They also began using flags from various third countries and transmitting deceptive location data to obscure their true origins and cargo loading points.
This deliberate obfuscation made it incredibly difficult to ascertain the true source of the oil, providing potential buyers with a convenient veil of plausible deniability.
While these vessels are now crucial to Russia’s oil revenues, their reliance comes with significant dangers. Their average age is approximately 20 years, according to S&P data, a stark contrast to the global oil fleet’s average of 13 years, drastically increasing the likelihood of oil spills or other catastrophic maritime incidents.
Natalia Gozak, office director of Greenpeace Ukraine, expressed grave concerns: “Lack of insurance combined with the really old vessels — this just increases the risk of environmental catastrophe,” highlighting the dual threat these ships pose.
Beyond environmental disaster, another chilling threat exists. There have been suspicions that these clandestine ships might be involved in underwater sabotage, targeting critical infrastructure like pipelines or communication cables and disguising these acts as accidents.
The shadow fleet also presents a more immediate and evident problem: it has “limited the cap’s efficacy,” as highlighted in a recent report by America’s Government Accountability Office. This means the illicit trade continues to funnel money into Moscow’s treasury, directly aiding its war efforts in Ukraine.
Despite these challenges, proponents of the sanctions insist that the measures are far from a failure.
Ben Harris, a former Treasury official in the Biden administration and one of the architects behind the price cap, emphasizes that even with their imperfections, the sanctions impose significant financial burdens on Russia. Transporting oil to distant markets like India or China, and constantly expanding the shadow fleet, incurs substantial costs for Moscow.
He concludes that “Enforcement is the real challenge,” underscoring the ongoing difficulty in policing these evasive tactics.
Currently, international efforts are intensifying, with more sanctions being implemented specifically to target and disrupt the shadow fleet’s operations.
The European Union, in its most recent announcement, has added over 500 shadow-fleet ships to its sanction lists, deterring ports from engaging with them. The United States, Britain, Canada, and Australia are also actively pursuing these vessels, aiming to effectively brand them as outcasts of the maritime world.
However, Russia consistently counters these efforts by acquiring and deploying new vessels to replenish its illicit fleet.
David O’Sullivan, the E.U. sanctions envoy, likened the situation to the American game ‘Whac-A-Mole,’ noting, ‘Circumvention is a bit like that,’ implying a continuous and frustrating battle against evasion.
Nonetheless, Russia still faces the considerable expense of purchasing and maintaining these new ships.
As Mr. O’Sullivan points out, “Everything we have done ends up costing them a lot more,” suggesting that while not fully effective, the sanctions significantly increase Russia’s operational expenses.
However, the current approach is far from perfect. The shadow fleet has devised numerous methods to bypass blacklisting. These include offloading cargo at sea to avoid detection or ‘flag hopping’—frequently altering their vessel registrations to hide their true identities and origins.
Meanwhile, as Ralby warned earlier, the West’s policies are inadvertently encouraging Russia to foster a massive, underground economic system.
Yet, government officials maintain that simply doing nothing is not a viable alternative.