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Ukraine war: Russia’s ‘ghost fleet’ is helping Moscow successfully skirt oil sanctions

In World
February 01, 2024

“It is not unusual, even before the war,” said KSE economist Elina Robakova.

“The shadow fleet is also used to avoid the normal business model” such as high insurance costs, she said.

Such ships, also called “dark fleets”, are also used by countries such as Iran and Venezuela, which are both under US oil sanctions, and even North Korea, said Atlantic Council researcher Elisabeth Braw.

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According to statistics from Lloyd’s List Intelligence, the number of these types of ships doubled last year and now make up some 10 per cent of oil tankers operating internationally.

That accounted for some 1,400 ships, the Atlantic Council said in January.

Russia has been slapped with an oil embargo, a price cap on Russian crude and a ban on providing services to ship oil by sea to stop it financing its war with Ukraine.

Initially successful, the US$60 per barrel price ceiling on Russian oil lost its impact once Moscow found new buyers and new tankers to deliver its exports.

Companies based in the EU, G7 member states and Australia are banned from providing services enabling maritime transport, such as insurance, of oil above that price.

To get around the sanctions, Moscow has had to reduce its dependence on Western maritime services by buying tankers and providing its own insurance, said Rystad Energy, a consultancy.

An oil pump jack in Russia. Moscow has been able to skirt sanctions on its oil thanks to its “ghost fleet”. Photo: Reuters

Ribakova estimates that more than 70 per cent of Russian oil transported by sea uses the ghost fleet.

KSE estimated in its “Russian Oil Tracker” report in December that 179 loaded shadow fleet tankers left Russian ports in November 2023.

Last October, the Russian shadow fleet enabled the export of some 2.3 million barrels per day of crude and 800,000 barrels of petroleum products out of a total Russian production of 10 million barrels a day, it added.

“Most of this dark fleet have not been inspected recently, have substandard maintenance, unclear ownership, no insurance and are being operated to circumvent sanctions and high insurance costs,” said Lloyd’s List Intelligence in December.

KSE regularly warns that the ageing vessels pose “huge environmental risks for the EU”, as the ageing, poorly maintained vessels skirt the coastlines of several European countries.

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Ships built more than 20 years ago are expected to comprise 11 per cent of the global tanker fleet by 2025, according to the Atlantic Council.

Before the war in Ukraine, the figure was three per cent.

None of the ships in the Russian ghost fleet has adequate P&I insurance – a must for commercial vessels to cover risks from war, collisions or environmental damage such as oil spills.

Some 90 to 95 per cent of the P&I insurance market is made of insurers from the European Union and the UK, both of which have slapped sanctions on Russia.

For the Atlantic Council, the shadow fleet is a non-military but powerful weapon because Ukraine backers would pay the price in the event of an accident at sea with a Western ship, or an oil spill.

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