Finding suitable vessels has become increasingly difficult due to the harshest Western sanctions to date targeting Russia’s oil exports.
Consequently, only dozens of tankers have joined the shadow fleet this year, a significant decrease compared to the hundreds observed in previous years, according to a Reuters report.
In a continued response to Russia’s ongoing war in Ukraine, the European Union and Britain jointly imposed a new round of stringent sanctions last month.
These measures aim to further isolate Moscow economically and politically, increasing the pressure on the Kremlin to cease its aggression.
Impact of sanctions
The sanctions target various sectors of the Russian economy, including finance, energy, and technology, with the objective of limiting Russia’s ability to fund its military operations and sustain its war effort.
This latest package builds upon previous punitive actions taken by the international community since the full-scale invasion began, demonstrating a sustained commitment from Western nations to hold Russia accountable for its actions and support Ukraine’s sovereignty and territorial integrity.
Sanctions, coupled with US restrictions, now affect over 440 shadow fleet tankers, including those essential for Russia’s oil shipments to major markets like China and India.
Venezuela, Iran, and Russia utilise a “shadow fleet” of typically old vessels with opaque ownership to bypass Western sanctions. These ships often lack the high-tier insurance required by major oil companies and many international ports.
Since its inception in 2022, the shadow fleet has played a crucial role for Russia, particularly in financing its war efforts through oil revenues.
Adding to trade complexities, the Group of Seven countries has imposed a price cap on Russian oil, in addition to existing sanctions.
Role and risks of shadow fleet
Industry estimates, from sources such as Lloyd’s List Intelligence and shipbroker Gibson, suggest the tanker fleet comprises 1,200 to 1,600 vessels.
This constitutes approximately one-fifth of the world’s total tanker fleet.
While hundreds of vessels were operational before the Ukraine war, the growth of the fleet has decelerated year-on-year.
This slowdown is attributed to an expanding list of sanctions and increased scrutiny from authorities and legal compliance teams regarding second-hand ship sales.
Hundreds of smaller coastal tankers, primarily used by Russia, are not included in the estimated size of the shadow fleet; these vessels are not ocean-going but have been used for oil transport.
Anna Giacomello, analyst with British maritime cyber defence and risk intelligence company Dryad Global, was quoted in the report:
Regulators are closing the net.
Despite the inherent risks, the allure of potential profit continues to attract some.
Leigh Hansson, a sanctions partner at Reed Smith, a law firm advising shipping and trading companies on oil sanctions compliance, noted that operators might still join the “shadow fleet” due to its potential for high profits.
She cautioned that major established players would likely avoid involvement, and only those with limited shipping market experience might be inclined to undertake risky operations, utilizing older vessels that lack coverage from major ship insurers.
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