Key ports on China’s east coast have closed the entrance to oil tankers that have been subject to US sanctions, Reuters reported on January 8, citing unnamed traders. This decision potentially limits the access of blacklisted vessels to major energy terminals on China’s east coast.
According to three traders who spoke to Reuters, China’s Shandong Port Group on Monday issued a notice banning such vessels from entering its port network. This decision potentially restricts the access of blacklisted vessels to major energy terminals on China’s east coast.
According to reports, Qingdao, Zhizhao, and Yantai, which serve as the primary terminals for the import of sanctioned oil, are under the control of Shandong Port Group.
Chinese ports block entrance to oil tankers subject to US sanctions
The decision comes at a time when the US Department of Defense has blacklisted COSTCO, a leading Chinese shipping company, and a number of other companies for alleged links to military activities.
There have also been reports that the administration of US President Joe Biden is planning to impose sanctions on a large number of additional shadow fleet tankers involved in the Russian energy trade.
EU sanctions against Russia’s shadow fleet
Restrictions on Russia’s “shadow fleet” were included in the 15th EU sanctions package approved on December 16.
The sanctions list now includes 52 additional vessels from third countries, purportedly supporting Russia’s energy sector and transporting military equipment for the Russian army. The total number of vessels under EU sanctions has reached 79. EU sanctions prohibit them from entering EU ports and receiving services from European companies.
Experts estimate that the “shadow fleet” exports almost 70% of Russian oil transported by tankers. According to the Atlantic Council, almost three quarters of Russia’s oil supplies are carried out using the shadow fleet.
These data, according to The Guardian, illustrate the problems faced by Western countries trying to reduce Russia’s oil export revenues by imposing a so-called price ceiling on Russian oil.
The “shadow fleet” is a means of circumventing sanctions for countries that are banned from trading oil or, as in the case of Russia, have restrictions imposed on trade (in particular, in the form of a price cap agreed by the G7 nations).
European Parliament calls to strengthen enforcement of the price cap
On November 14, the European Parliament adopted a resolution demanding targeted sanctions against Russia’s shadow fleet. The European Parliament calls on the EU executive to introduce more serious targeted measures against these vessels, their owners, operators, and other persons involved in the next sanctions packages.
The resolution also calls on the EU and the G7 countries to strengthen enforcement of the price cap for Russian offshore oil ($60 per barrel) and to completely ban imports of Russian fossil fuels.
The MPs also demand sanctions against ships that enter EU waters without insurance and call for increased control over ships in EU territorial waters using drones, satellites, and targeted inspections.
The shadow fleet allows Russia to receive the money that fuels its illegal and unjustified war of aggression against Ukraine.
This fleet consists of old tankers, often uninsured and with uncertain ownership. Russia uses it to export its crude oil and petroleum products, despite international sanctions imposed by the EU and the Group of Seven (G7).
G7 tightens sanctions against Russia and aims to block evasion schemes
In October, the finance ministers of the Group of Seven (G7) have promised to step up their efforts to thwart Russia’s attempts to evade Western sanctions put in place after Moscow started its all-out war against Ukraine.
The G7 pledged in a statement following their meeting in Washington to take additional measures, including focusing on violators of the earlier-introduced oil price restriction, although they did not make the details public.
The G7 finance ministers announced that they would implement further steps to “raise the costs to Russia of using the shadow fleet to evade sanctions.”
Officials claim that by moving oil without legally identifying its cargo or itinerary, Russia has circumvented sanctions by using its fleet of shadow tankers, many of which are outdated, unregistered, and badly maintained.
Risk of environmental disasters posed by Russia’s shadow fleet
Russia’s shadow fleet consists of tankers and ships that operate outside Western regulations to transport oil while evading sanctions. These vessels, often older and often uninsured, allow nations under restrictions to continue oil exports with less transparency and oversight than conventional fleets.
In late December 2024, Russia’s two aging tankers, Volgoneft-212 and the Volgoneft-239, carrying 9,200 tons of heavy fuel oil, were wrecked when they ran into a storm. The catastrophe has caused a huge oil spill. The ecological disaster involving two old Russian tankers off Crimea escalated in January, with the oil spill spreading to the beach.
Besides being unsafe and unregulated, these vessels often lack insurance. In the event of a leak or a more serious spill, it will be difficult for governments to hold these vessels accountable. Russia’s old tankers pose a risk of environmental disasters, including serious oil spills in the territorial waters of the European Union, according to the EP statement.
A joint investigation by Politico and the nonprofit journalism group SourceMaterial has revealed at least nine cases of Russian shadow fleet vessels leaving oil spills in global waters since 2021.
They found oil leaks linked to Russia’s “shadow fleet” in different parts of the world—from Thailand to Vietnam, Italy, and Mexico. As Russia is under Western sanctions, more and more tankers are transporting its oil illegally around the world, risking a potential environmental disaster.
Russia’s oil sales and shadow fleet
According to the CREA analysis, Russia continues to make substantial revenues from the sale of its oil in spite of sanctions and an oil price restriction. In October, Russia’s monthly export earnings from fossil fuels fell 4% to EUR 620 million per day. For the first time in four months, Russia’s monthly export earnings from seaborne crude oil increased by 10% in October to EUR 210 million per day.
The shadow fleet has generated for Russia more funds than Ukraine has received in aid from its Western partners since the beginning of Russia’s full-scale war. This was announced by the Ukrainian President Volodymyr Zelenskyy during a press conference at the Ukraine-Northern Europe Summit.
Ukraine’s President noted that Russia earns $10 to $12 billion a month from the shadow fleet. “So, sanctions do not work. If they can earn such a lot of money, it means that these sanctions are not working. More precisely, they work, but not 100%,” Zelenskyy said.
Oil Price Cap to limit Russia’s ability to fund its war against Ukraine
The Western coalition adopted the Price Cap to limit Russia’s ability to fund its war against Ukraine through the sale of its oil. The Price Cap prohibits maritime providers from engaging with Russian-origin crude oil that exceeds $60 per barrel in price.
In December 2022, the Western coalition set an upper limit of $60 per barrel for Russian oil exports by sea. The sanctions also prohibit Western companies from providing oil transportation services from Russia at a price higher than the ceiling.
The restriction has forced Russia to redirect its oil sales to much more distant countries, such as China and India, and to invest in “shadow fleets” of worn-out tankers that are not officially tracked.
In February 2024, the Price Cap Coalition issued an “Oil Price Cap Compliance and Enforcement Alert.” It covers Russia’s evasion strategies for circumventing the price cap. The enforcement alert identifies sanctions evasion methods that industry stakeholders need to diligently monitor.
Closing loopholes and preventing sanctions evasion
Russia has found ways to function under international sanctions for almost three years into the invasion of Ukraine and in the face of trade restrictions, prompting the Western nations to close the loopholes. The main source of income for Russia is crude oil export. Russia is able to keep up with its exports by “shadow fleet” crude oil and shifting to new markets such as India and China.
Experts have identified several issues with the EU and US sanctions and loopholes that help Russia circumvent the restrictions. In particular, they are talking about strengthening the oil embargo—lowering the ceiling on Russian crude oil—and stricter supervision and punishment of violators of the price cap, including companies and countries that cooperate with Russia’s “shadow fleet”.
Enforcing sanctions can help cut Russia’s oil revenues and will help exhaust its funding for Putin’s war against Ukraine. Lack of measures against Moscow led to more deadly strikes on Ukrainian cities, increasing the threat of a broader conflict in the region. Ensuring sanctions monitoring and enforcement, closing loopholes for evasion, and penalizing those involved in the schemes can help make them efficient.
