"Shadow" Fleet Helps Russian Oil Economy

A new report indicates that a growing fleet of oil tankers is helping Russia transport oil to buyers overseas, with most of the shipping operated by shell companies registered in such places as Hong Kong and Dubai. While European ports are closed to seaborne oil shipments from Russia, Russia has managed to cobble together a fleet of aging oil tankers to take the oil to India and China, who have not subscribed to the embargo on Russian oil. According to the report:

"Industry insiders estimate the size of that 'shadow' fleet at roughly 600 vessels, or about 10% of the global number of large tankers. And numbers continue to climb.

Who owns and operates many of these ships remains a puzzle. As trading Russian oil became more complex over the past year, many Western shippers withdrew their services. New, obscure players swooped in, with shell companies in Dubai or Hong Kong involved in some cases. Some bought boats from Europeans, while others tapped old, creaking ships that might have otherwise ended up in the scrapyard. [snip]

While Western countries have banned most Russian oil imports, there aren’t any rules preventing Western ships from delivering to buyers such as China and India, or from providing services such as insurance — so long as the G7 price caps are respected. Ships with European owners accounted for 36% of Russian crude trade in January, according to Kpler.

But the legal and reputational risks of failing to comply with the price caps loom large. At the same time, Russia is eager to stop working with Western shippers. That has led to the development of a new cohort, whose makeup is murkier — and history more checkered."  (our emphasis)

As we noted in a post on February 25, it appears that the "tough" sanctions imposed on Russia aren't as tough as advertised, and are incremental and scattered. This is a blatant case where Western tankers facilitate the key element of Russia's war economy: oil exports. That Western oil tanker companies, and the insurance companies that insure them, haven't been subject to sanctions is disturbing, after everything Ukraine has gone through. The weapons that those export sales buy are costing lives in Ukraine, and the Western shippers and insurers have to be dealt with.

(photo: Gary2014 Shutterstock)