The Group of Seven democracies have implemented measures to restrict Russia's oil export earnings, which are used to finance the war against Ukraine. However, Russia has devised a strategy involving a shadow fleet of hundreds of aging tankers to circumvent sanctions and maintain its oil revenue.
The shadow fleet comprises used tankers acquired by non-transparent entities based in countries not imposing sanctions, such as the United Arab Emirates and the Marshall Islands. These tankers are flagged in locations like Gabon or the Cook Islands and are utilized to help Russian oil exporters evade the $60 per barrel price limit set by Ukraine's allies.
Estimates suggest that there are over 400 ships in the shadow fleet capable of transporting oil and related products. While these vessels do not conceal their visits to Russian oil terminals, their ownership and safety practices remain ambiguous, raising concerns for Western governments and environmental groups.
The price cap, enforced since December 2022, aims to curb Russia's profits while ensuring a continuous flow of oil to global markets and preventing energy shortages that could lead to increased gasoline prices and inflation. The cap restricts service providers from engaging with oil priced above the threshold, leveraging the stringent insurance requirements set by the U.N.'s International Maritime Organization.
The shadow fleet evades the price cap by being owned by opaque entities in non-sanctioning countries and securing insurance from non-Western sources. This evasion has enabled Russia to fetch higher prices for its oil on the global market, boosting its oil income and providing additional funds for military expenditures.
Concerns regarding the shadow fleet extend to potential oil spills and sabotage due to the advanced age of the vessels, making them more susceptible to accidents if not adequately maintained. Recent incidents, such as a tanker losing engine power in the Danish Straits, have highlighted the risks associated with these aging tankers.
In response, several countries have intensified efforts to monitor and track shadow fleet vessels to safeguard critical infrastructure. While sanctions have been imposed on over 100 vessels involved in trading Russian oil in violation of the cap, the effectiveness of these measures remains a subject of debate.
