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Ever since the U.S. introduced sanctions on Russian energy, Moscow has been transporting oil under the radar using clandestine techniques such as shadow fleets. Demand for Russian crude has risen from some countries as Putin has offered oil at highly discounted rates to maintain Russia’s export revenues. Countries such as China and India, who have so far ignored the U.S. sanctions, have been driving this demand. Now, there’s a plan to crack down on Russian shadow fleets to ensure that they cannot circumvent sanctions so easily.
Shadow fleets have long been used to export crude to other parts of the world. Both Iran and Venezuela have been known to use the technique to avoid sanctions, with many of their oil products bound for China and other parts of Asia that do not adhere to U.S. sanctions.
Russia began to use shadow fleets to move its energy products following its 2022 invasion of Ukraine and the subsequent sanctions it faced. To ensure its economy was not severely disrupted, Putin opted to clandestinely continue to export crude to bring in revenue. To achieve this, Russia has been using a fleet of around 700 older, poorly maintained ships without modern identification systems to transport oil while avoiding detection.
The term shadow fleet has a wide range of definitions, but when it comes to Russia’s use of this method it is generally taken to mean “all vessels lacking Western insurance and belonging to non-EU/G7+ companies”. Russia’s shadow fleet “makes use of flags of convenience and intricate ownership and management structures while employing a variety of tactics to conceal the origins of its cargo, including ship-to-ship transfers; automatic identification system blackouts; falsified positions; transmission of false data; and other deceptive or even illegal techniques.”
As well as circumventing the sanctions the U.S. put in place to cause economic damage to Russia in an attempt to encourage Moscow to stop the war with Ukraine – oil and gas contribute around half of the Kremlin’s revenues – the use of shadow fleets poses several threats. Because of the poor regulations, ageing vessels and lack of knowledge about their shipping path they can cause harm to the environment and threaten maritime safety and security. This risk led members of the European Parliament to call for greater maritime surveillance, tighter shipping controls, and stricter sanctions to address the significant environmental and safety threats posed by Russian shadow fleets in October 2024.
In December, Finnish authorities seized a Russian vessel moving through a Finnish bay. The Eagle S ship was found to be transporting 100,000 barrels of oil from St. Petersburg. This was an unprecedented move that many European powers are calling for more of. The Eagle S damaged undersea cables in the Baltic Sea and Danish authorities found it to have 32 faults and deemed it not seaworthy. Around 50 percent of sanctioned Russian oil travels through the Gulf of Finland, according to the Finnish government. This poses a safety and environmental threat to the Nordic country. However, complex global shopping rules and complicated logistics will make it difficult to prevent shadow fleets from transporting crude.
In February, Denmark announced plans to increase inspections of vessels transporting Russian crude to protect both the environment and maritime safety. The Danish Maritime Authority will conduct ‘Port State Control checks’ on ships anchored outside Skagen that “cannot be considered in innocent passage,” according to a statement. They will check that ships comply with European maritime regulations and standards. Most shadow fleet ships do not call at ports to avoid attracting attention, but the new rules will see that suspicious ships moving through Danish waters are checked. The U.K. also tightened rules last year to check more ships moving through the English Channel, assessing their insurance accreditation.
Much of Russia’s shadow fleet has come from European and U.S. shipowners, who have sold at least 230 older vessels to Russia, according to an investigation led by a Dutch investigative outlet, Follow the Money (FTM). These tankers are thought to have earned shipowners a combined $6bn in revenues since 2022. They have mainly sold the vessels to buyers in countries not participating in the sanctions, such as India, Hong Kong, Vietnam and the Seychelles. Greek owners have sold the largest number of ships, at around 127 tankers, while U.K. companies have sold 22, and German and Norwegian owners sold 11 and eight respectively.
Selling the ships to Russia is highly appealing when the alternative is selling them for scrap. An analyst at Lloyd’s List explained, “A lot of European shipowners had old tonnage that they thought wasn’t really worth much… All of a sudden it doubled in value – so they scrambled to sell it.”
The EU introduced new rules in late 2024 requiring companies selling vessels to third countries to ensure they were not being used to circumvent sanctions. However, a reported 32 European-owned tankers have since been sold into Russia’s shadow fleet. The introduction of stricter regulations on independent vessels in the waters of various European countries could deter Russia from using its shadow fleet, although putting these measures in place would be expensive and complicated, as well as complex in terms of legality.
