$14bn: Moscow’s shadow fleet outlay over the last three years

ENB Pub Note: The article below is an interesting update to the Russian shadow fleet and how they have turned sanctions from being a weapon, to turning a 4.2% growth in GDP for Russia, which relies on energy exports for an estimated 40% of its export numbers. 

Kennedy, the author below, states that Russia may have wasted 14 billion dollars on the shadow fleet, and I have a different take. He has been able to take that oil and switch selling from the U.S. Dollar to Rubles in Russian currency. That is direct cash flow, and has kept his war machine and country growing through the sanctions. 

• Size and Composition:
  • Estimates suggest the shadow fleet comprises 600–1,400 oil tankers, accounting for roughly 10–20% of the global crude oil tanker fleet. The Kyiv School of Economics (KSE) estimates over 630 tankers, with 399 oil tankers identified as of October 2024.
  • The fleet includes a “core” group of 45 crude oil tankers and 41 oil product tankers consistently used between January 2023 and June 2024.
  • Tankers are categorized into:
    • Gray Fleet: Vessels sold post-2022 invasion, often to obscure entities in the Middle East or Asia, with frequent flag changes (“flag hopping”). These vessels obscure ownership but may appear compliant.
    • Dark Fleet: Older vessels, often previously used for Iranian or Venezuelan oil, engaging in deceptive practices like disabling Automatic Identification Systems (AIS) or ship-to-ship (STS) transfers.
  • Common tanker types include Aframax, Panamax, and Suezmax, with sizes ranging from 220–250 meters in length and deadweight capacities increasing from 60.3 million metric tons (2020) to 92 million metric tons (2023).
• Age and Condition:
  • The average age is around 18–20 years, with many vessels over 20 years old, compared to a global fleet average of 8.3 years in 2020 rising to 14.6 years by 2023.
  • These tankers are often poorly maintained, underinsured, or lack Western insurance (e.g., International Group of P&I Clubs), increasing risks of accidents like oil spills or collisions.
  • Before the 2022 invasion, vessels over 20 years old were 3% of the global fleet; this is projected to rise to 11% by 2025 due to shadow fleet growth.
• Ownership and Flagging:
  • Ownership is obscured through shell companies in jurisdictions like the United Arab Emirates (UAE), Hong Kong, Seychelles, Vietnam, or Marshall Islands. A single UAE firm reportedly owns 24 sanctioned ships.
  • Many vessels are linked to Russia’s state-owned Sovcomflot, with 69 vessels (54 oil tankers) sanctioned by the U.S. in January 2025.
  • Common flags of convenience include Gabon, Cook Islands, Panama, Liberia, Barbados, and Eswatini, with Gabon registering 98% high-risk or unidentifiable tankers.
  • Tactics like frequent reflagging, AIS blackouts, and complex ownership structures (e.g., single-ship shell companies) are used to evade sanctions.
• Investment and Operations:
  • Russia has invested approximately $10 billion since 2022 to acquire and operate these tankers.
  • The fleet transports up to 70% of Russia’s seaborne oil (4.1 million barrels/day by June 2024), with 89% of crude oil and 38% of oil products carried by shadow vessels.
  • Deceptive practices include STS transfers in international waters (e.g., off Greece, Morocco), blending oil to obscure origins, and spoofing location data.
• Safety and Environmental Risks:
  • At least 50 incidents (fires, collisions, engine failures, oil spills) have been reported since 2022, including the Andromeda Star collision near Denmark and the Pablo explosion off Malaysia.
  • Lack of proper insurance and maintenance raises concerns about potential environmental catastrophes, particularly in busy routes like the Baltic Sea, Danish Straits, or English Channel.

• Size and Composition:
  • The LNG shadow fleet is smaller, with estimates of around 50 vessels, including 9 identified shadow LNG tankers as of mid-2024.
  • Four ice-class LNG carriers were reflagged from Panama to Russia and renamed in 2024, likely to transport sanctioned LNG from the Arctic LNG 2 project.
  • These include vessels like Pioneer and Nova Energy, sanctioned by the U.S., UK, and EU for smuggling LNG.
  • The fleet includes Arc-4 class ships (ice-capable) and non-ice-class vessels, the latter ill-suited for Arctic routes due to floating ice and lack of reinforced hulls.
• Ownership and Flagging:
  • Ownership is often transferred to obscure companies, with at least eight vessels moved to Dubai-based entities in 2024.
  • Some vessels are re-registered in the UAE or India, with others using flags like Gabon or Barbados.
  • Sovcomflot owns four sanctioned LNG tankers.
• Operations:
  • LNG tankers primarily target Asian markets, with potential routes via the Suez Canal or Cape of Good Hope, though Arctic routes are considered with nuclear icebreaker support.
  • The Arctic LNG 2 project’s first production line (83 TWh/year) requires approximately 11 voyages annually, but the current fleet may fall short without additional vessels or icebreaker assistance.
  • Deceptive practices mirror those of oil tankers, including AIS manipulation and STS transfers.

• Primary Markets:
  • India: A major buyer since 2022, importing significant volumes of Russian crude oil, often refined and re-exported. India’s private refineries, particularly in Shandong, are key customers.
  • China: The largest buyer, with shadow fleet tankers delivering crude to ports like Tianjin. China’s demand has grown as EU imports declined.
  • Turkey: Imports both crude and oil products, often via STS transfers in the Mediterranean or Black Sea.
• Secondary Markets:
  • Morocco and Greece serve as transshipment hubs for STS transfers, with oil later redistributed to Asia or re-exported.
  • Smaller volumes go to countries like Vietnam, Seychelles, or other non-sanctioning nations.
  • Some refined Russian oil re-enters Western markets indirectly after processing in India or China, complicating sanctions enforcement.
• Trends:
  • Post-2022, Russia shifted exports from Europe to Asia, requiring four times the shipping capacity due to longer routes.
  • Up to 90% of Russian crude oil is shipped above the G7’s $60/barrel price cap, with Urals crude averaging $68–$80/barrel in 2023–2024.

• Primary Markets:
  • China: A key destination for Arctic LNG 2 exports, with shipments routed via the Suez Canal or Cape of Good Hope.
  • India: Increasingly targeted for LNG, with non-ice-class vessels capable of eight voyages per year to Indian ports.
  • Other Asian Markets: Potential buyers include countries like Japan or South Korea, though China and India dominate due to proximity and demand.
• Secondary Markets:
  • Europe: Despite sanctions, some Russian LNG from unsanctioned projects like Yamal LNG continues to supply Europe, though volumes are declining.
  • Transshipment hubs in non-sanctioning countries may redistribute LNG to smaller Asian or Middle Eastern markets.
• Trends:
  • The Arctic LNG 2 project, sanctioned by the U.S., primarily targets Asia due to Europe’s push to phase out Russian LNG.
  • Chinese buyers are less concerned about secondary sanctions under the Trump administration, facilitating LNG imports.
  • Russia aims to expand LNG exports using shadow fleets, but the smaller fleet size limits capacity compared to oil.

• Sanctions and Enforcement:
  • The U.S., EU, UK, and G7 have sanctioned over 183 shadow fleet vessels (35% of the dark fleet) by January 2025, with the EU targeting 68 tankers and the UK banning 10.
  • Enforcement challenges include tracking oil through refining and re-export, as well as Russia’s use of multi-tiered shell companies.
  • Recent actions, like Shandong’s ban on sanctioned vessels, may disrupt China’s imports, but Russia continues to adapt with new registries (e.g., Barbados, Laos).
• Environmental and Security Concerns:
  • The shadow fleet’s poor maintenance and lack of insurance pose risks of major oil spills, particularly in sensitive areas like the Baltic Sea or Arctic.
  • Some vessels may double as “spy ships,” equipped with non-standard communications gear, raising security concerns in strategic areas like Sweden’s Gotland.
• Critical Perspective:
  • While sources emphasize the shadow fleet’s role in evading sanctions, the narrative may overstate environmental risks to push for stricter enforcement. The global tanker fleet, including non-shadow vessels, also includes older ships, and spill incidents have remained low since 2000.
  • The focus on Russia’s shadow fleet may obscure similar practices by other sanctioned nations (e.g., Iran, Venezuela), suggesting a selective enforcement lens.