The most severe sanctions ever imposed by the West on Russia’s oil exports have made it difficult to find suitable vessels.
According to a Reuters article, this is a marked decrease from the hundreds of tankers that were present in the previous years.
Last month, in response to Russia’s continuing war in Ukraine the European Union (EU) and Britain (UK) jointly imposed new sanctions.
The aim of these measures is to isolate Moscow further economically and politically in order to increase pressure on Moscow to stop its aggressive behavior.
Sanctions and their impact
These sanctions are aimed at limiting Russia’s military funding and war efforts. They target different sectors in the Russian economy including energy, finance and technology.
The latest sanctions package is a continuation of previous punitive measures taken by the international communities since the invasion began. It shows a commitment on the part of the Western nations to continue holding Russia responsible for its actions, and supporting Ukraine’s territorial integrity and sovereignty.
The US sanctions, combined with Russian sanctions, have now affected over 440 tankers of the shadow fleet, which are essential to Russia’s oil exports to key markets such as China and India.
Venezuela, Iran and Russia use a so-called “shadow fleet”, consisting of old ships with unclear ownership, to circumvent Western sanctions. Many of these ships lack high-level insurance that is required by many ports and major oil companies.
The shadow fleet, which was created in 2022 by the Russian government, has been a key part of its military efforts, especially in terms of financing them through revenues from oil.
In addition to the existing sanctions, Group of Seven nations have imposed a cap on Russian crude oil prices.
Shadow fleet: its role and potential risks
According to industry estimates from shipbroker Gibson and Lloyd’s List Intelligence, the fleet of tankers is estimated at 1,200-1,600 vessels.
The world tanker fleet is approximately a fifth of its total size.
The fleet is shrinking year on year. Before the Ukraine War, hundreds of ships were in operation.
The slowdown can be attributed to the growing list of sanctioned countries and an increased level of scrutiny by authorities and compliance teams in relation to second-hand ships sales.
The shadow fleet does not include hundreds of small coastal oil tankers, mostly used by Russia. These vessels do not travel oceans but are used to transport crude.
Anna Giacomello is an analyst at Dryad Global in Britain, a maritime cyber-defence and risk intelligence firm.
The regulators are closing down the net.
The potential for profit is still attractive to some, despite the risks.
Leigh Hansson is a partner in Reed Smith’s sanctions department, which advises shipping companies and traders on compliance with oil sanctions. She noted that some operators may still be tempted to join the shadow fleet due to high profit potential.
She warned that established major players will likely not be involved, with only limited experience in the shipping market being inclined to risky operations. Older vessels, which lack insurance coverage by major ship insurers, may also have a tendency to take on such risks.
As new information becomes available, this post may change.
