Satellite image show an oil spill by the Russian “shadow fleet”. Source: SkyTruth Cerulean
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.
Politico journalists used satellite imagery from the non-governmental organization SkyTruth and combined it with shipping data from the market analysis company Lloyd’s List and the platform Kpler.
They found oil leaks linked to Russia’s “shadow fleet” in different parts of the world—from Thailand to Vietnam, Italy, and Mexico.
These tankers also passed through busy shipping corridors such as the Red Sea and the Panama Canal. This means that in the event of a serious accident, international trade routes could be disrupted.
Significant danger to marine environment
Swedish Foreign Minister Maria Malmer Stenergard told the newspaper that the shadow ships pose a “significant danger” to the marine environment, and the cases revealed by journalists illustrate this.
As Russia is under Western sanctions, more and more tankers are transporting its oil illegally around the world, risking a potential environmental disaster.
Moscow has organized a “shadow fleet” of over 600 tankers, often hidden through shell companies, to circumvent the G7 price cap of $60 per barrel. Iran and Venezuela also use this tactic to circumvent international sanctions.
Russian oil exports increase despite sanctions – KSE
According to a Kyiv School of Economics report, Russian oil exports through its shadow fleet have almost doubled over the past year, reaching 4.1 million barrels per day.
The Kyiv School of Economics estimates that when the crude oil price cap took effect in December 2022, it was just 2.2 million barrels per day. As of June 2024, 70% of seaborne exports of Russian oil were conducted on shadow fleet vessels—including 89% of crude oil and 38% of oil product shipments.”
“In August, 107 loaded shadow tankers left Russian ports, with two involved in STS transfers. 87% of these vessels were over 15 years old. These poorly maintained and uninsured tankers pose a high environmental risk, significantly increasing the likelihood of oil spills—disasters for which Russia would likely refuse to pay, the report said.”
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.
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.
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.
Oil price cap compliance and enforcement
In February, 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.
First, there are opaque shipping and extra costs as a result of attempts to conceal price, shipment, customs, and insurance fees.
Second, the use of a complicated supply chain, third-party middlemen, and shell firms to conceal the origin of Russian oil. It includes frequent changes in ownership of vessels.
Third, the use of Russia’s “shadow fleet,” made up of old vessels with hidden ownership that do not adhere to industry standards.
Stakeholders must raise red flags in such cases and actively conduct due diligence to prevent Russia from evading the oil price cap.
Sanctions against ships involved in Russia’s shadow fleet
In February, the US Treasury Department’s Office of Foreign Assets Control announced the second round of sanctions in 2024 for violating price restrictions on the maritime transportation of Russian oil.
The new US sanctions target four legal entities and one vessel involved in a scheme to violate the $60 per barrel price ceiling for Russian oil at the end of 2023. Three companies registered in the United Arab Emirates and one in Liberia were subject to the sanctions.
In July, the United Kingdom added 11 new tankers to its sanctions list. They are linked to the transportation of oil or oil products from Russia to third countries. The government clarified that vessels involved in activities aimed at destabilizing, undermining, or threatening Ukraine’s territorial integrity, sovereignty, or independence were subject to the sanctions.
On June 24, the EU Council announced new sanctions against tankers belonging to Russia’s shadow oil fleet.
In July, more than 40 European countries agreed on a plan to combat Russia’s oil “shadow fleet” at the summit of the European Political Community.
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.