Introduction
Following Russia’s full-scale invasion of Ukraine in February 2022, the international community, led by the United States, the European Union, and other G7 nations, imposed sweeping sanctions on Russian oil exports. These sanctions aimed to limit Russia’s ability to fund its war effort by restricting its access to global energy markets.
However, in response, Russia has increasingly relied on a “shadow fleet” of oil tankers—an unregulated, largely anonymous fleet of ageing, Soviet-era or second-hand tankers operating under flags of convenience, with fake documentation, hidden ownership structures, and opaque shipping practices. This fleet enables Russia to circumvent sanctions, continue exporting hydrocarbons, and undermine Western economic pressure.
Here we examine:
1. The regimes of sanctions imposed on Russian oil exports.
2. The methods Russia’s shadow fleet uses to evade detection.
3. The estimated scale of oil exports bypassing sanctions.
4. Potential countermeasures for enforcing existing sanctions.
1. Sanctions on Russian Oil Exports
Since the start of the second invasion of Ukraine, Western countries have imposed multiple layers of sanctions on Russian oil exports. These include:
A. The G7 and EU Oil Price Cap
• Implemented in December 2022, the G7, EU, and Australia imposed a price cap of $60 per barrel on Russian seaborne crude oil.
• Companies involved in shipping, insurance, and financial services can only participate in transactions involving Russian oil if it is sold at or below the cap.
B. The EU Oil Embargo
• The European Union banned the import of Russian crude oil from December 2022 and Russian refined petroleum products from February 2023.
• This eliminated Russia’s access to one of its largest energy markets, forcing it to seek alternative buyers.
C. Restrictions on Western Shipping and Insurance Services
• Western maritime insurers, who cover over 90% of global tanker traffic, are prohibited from insuring Russian oil shipments above the $60 cap.
• Major Western ports are closed to Russian oil tankers.
Despite these sanctions, Russia has developed an extensive shadow fleet to continue illicit exports, particularly to China, India, and the Middle East.
2. Methods Used by Russia’s Shadow Fleet
Russia’s shadow fleet consists of an estimated 600-1,000 vessels, mostly composed of aging Soviet-built tankers or second-hand vessels purchased from international markets. These ships use several deceptive tactics to evade detection:
A. Fake Bills of Lading and Certificates of Origin
• Russian tankers falsify documentation (bills of lading and certificates of origin) to obscure the origin of oil.
• Fake certificates suggest that oil comes from Kazakhstan, UAE, or other non-sanctioned countries.
• These documents are presented to western banks, to obtain sanctioned trade finance, and then the trade finance arrangements are syndicated to banks with low compliance standards, which in turn syndicate them back to Russian banks (often via "paper banks" - banks that just exist on paper but are effectively controlled by Russian banks with back-to-back syndication arrangements).
B. Ship-to-Ship (STS) Transfers and Oil Mixing
• Oil cargoes are trans-shipped at sea, often in international waters, to mix Russian crude with non-sanctioned oil.
• Sulphur content analysis can often determine oil’s origin, but mixed cargoes make this difficult.
• The Sea of Azov (in Russian-occupied Ukraine), the Gulf of Laconia (Greece), Ceuta (Spain), and Malaysia’s waters are hotspots for these operations.
C. Turning Off Transponders (Dark Fleet Operations)
• Russian shadow tankers disable their Automatic Identification System (AIS), making them invisible to satellite tracking.
• This tactic, known as “going dark,” allows tankers to sail undetected from Russian ports into international waters.
D. Flags of Convenience and Identity Scrubbing
• Ships operate under flags of convenience from nations like Panama, Liberia, or the Marshall Islands.
• Some tankers physically repaint their hulls with new ship names and registration numbers while at sea.
• This erases their Russian identity, allowing them to dock at foreign ports without immediate suspicion.
E. Use of Ghost Companies
• Ownership of shadow fleet vessels is often hidden behind offshore shell companies in Dubai, Hong Kong, and Singapore.
• These entities allow Russian-controlled vessels to masquerade as neutral ships.
3. Scale of Russian Oil Export Evasion
Despite sanctions, Russia continues to export millions of barrels of oil per day through shadow fleet operations.
• Estimates suggest that 50-75% of Russian crude oil exports bypass official sanctions.
• China and India have become the largest buyers, with Russian oil trading well above the $60 price cap.
• Russia has raked in hundreds of billions of dollars in revenue despite Western restrictions.
This sanctions evasion network has undermined Western attempts to economically squeeze Russia, necessitating stronger enforcement mechanisms.
4. Strategies to Enforce Sanctions Against Russia’s Shadow Fleet
To counter Russia’s evasion tactics, Western countries can adopt several escalatory measures:
A. Maritime Interdiction by Western Military Vessels
• NATO and allied navies could stop tankers operating with transponders turned off.
• Ships engaging in unusual movements, identity changes, or ship-to-ship transfers could be intercepted.
Challenges:
• Risk of escalation with Russia.
• Legal questions under international maritime law.
B. Seizure of Non-Compliant Vessels at Ports
• Ships suspected of sanctions violations can be arrested at their next port of call under national security laws.
• Precedents exist: The US has previously seized Iranian oil tankers for violating sanctions.
C. Expanding Secondary Sanctions
• Western nations could sanction any entity—banks, insurers, or shipowners—that supports Russia’s shadow fleet.
• Sanctions could target China, India, and Gulf-based facilitators that help Russia bypass restrictions.
D. Enhanced Satellite and AI Surveillance
• AI-powered tracking can analyze ship movements, ship-to-ship transfers, and oil mixing patterns.
• Blockchain-based oil tracking can prevent false documentation.
E. Cracking Down on Flags of Convenience
• Countries providing flags of convenience could face penalties, forcing them to tighten oversight.
• Western nations could require more stringent ship origin verification.
Conclusion: The Need for Stronger Enforcement
Russia’s shadow fleet has severely undermined oil sanctions, allowing Moscow to finance its war effort while maintaining access to global markets.
To counteract this, Western nations must escalate enforcement measures, including:
• Intercepting shadow tankers at sea.
• Seizing non-compliant vessels in Western-aligned ports.
• Sanctioning financial and logistical facilitators.
Stronger measures will raise Russia’s cost of evasion, reducing its economic resilience and weakening its war effort over time. However, any enforcement escalation risks direct confrontations with Russian-backed entities, requiring careful legal and diplomatic coordination.
Ultimately, only a multinational crackdown involving maritime, financial, and diplomatic efforts will successfully disrupt Russia’s illicit oil trade and enforce economic sanctions effectively.