Keep knowledgeable with free updates
Merely signal as much as the Battle in Ukraine myFT Digest — delivered on to your inbox.
Russia has expanded the capability of its shadow fleet of oil tankers by nearly 70 per cent year-on-year regardless of a latest crackdown on insurers and transport corporations enabling Moscow to bypass western sanctions, new analysis has proven.
The amount of Russian oil transported by poorly maintained and underinsured tankers has elevated from 2.4mn barrels per day in June 2023 to 4.1mn in June 2024, based on a report printed by the Kyiv College of Economics (KSE) on Monday.
The development comes because the US, Canada, Japan and European allies more and more focused world insurers and ship house owners in a bid to crack down on Moscow’s skill to generate revenues for its conflict in Ukraine. In addition they added to the sanctions checklist corporations and particular person vessels related to the Russian shadow fleet.
“Sanctions on tankers have been fairly efficient however the designation marketing campaign has been too restricted to truly rein in Russia’s shadow fleet,” mentioned Benjamin Hilgenstock, one of many authors of the KSE report.
He added that sanctions must be used “systematically” to implement a requirement for satisfactory oil spill insurance coverage and, thereby, “handle the intense and pressing environmental menace stemming from the shadow fleet”.
Many of those vessels recurrently navigate busy European waters, together with the Baltic Sea, the Danish Straits and the Strait of Gibraltar, rising the chance of environmental disasters for the EU and neighbouring international locations.
KSE proposes the institution of “shadow-free” zones in European waters to mitigate these dangers. In any other case a catastrophe is simply “ready to occur on Europe’s doorstep,” the report argues. “The weak hyperlink within the regulatory framework, along with the dramatically expanded function of shadow tankers within the Russian oil commerce, implies that a serious environmental catastrophe is just a query of time.”
In June 2024, 70 per cent of Russia’s seaborne oil was transported by the shadow fleet, which Russia is estimated to have spent $10bn assembling, based on the KSE. This included 89 per cent of Russia’s complete crude oil shipments, most of which traded above the $60 per barrel value cap since mid-2023, and 38 per cent of Russia’s oil product exports.
By assembling this fleet, Moscow severed ties with value cap coalition international locations that pressured world insurance coverage corporations to adjust to the sanctions regime, lowering Russia’s choices to primarily home insurers.
This raised important issues about such protection’s high quality, reliability, and scope. The mix of the tankers’ age — which averages 18 years — and lack of satisfactory insurance coverage makes these vessels extraordinarily hazardous, the KSE report argues.
The dangers are additional heightened by the fleet’s use of grey-listed flag states nameless possession buildings. They typically embody a number of intermediaries resembling British accountants and Dubai-based corporations hidden by layers of company entities, the FT’s latest investigation discovered.
KSE report authors argued that within the occasion of bother, European states might face clean-up prices working into billions of euros.
A number of accidents involving shadow ships related to Russia have already occurred. This March, a 15-year-old shadow tanker Andromeda Star collided with one other vessel close to Denmark. No oil was spilt because it was on the way in which to Russia, unloaded.
Over the previous two years, 4 Russian shadow fleet vessels have misplaced engine energy, together with incidents within the Dardanelles and the Danish Straits.
Shadow fleet vessels used to hold oil from different sanctioned sellers additionally skilled engine breakdowns, highlighting upkeep points and explosions. In Could 2023, a 27-year-old Gabon-flagged ship with 700,000 barrels capability used to move Iranian oil suffered a big explosion close to Indonesia. It was empty on the time.
A number of shadow fleet vessels have been concerned in oil spills, with some fleeing the scene after inflicting environmental injury. In 2019, the 23-year-old Ceres I, beforehand concerned within the Iran oil commerce, collided with one other tanker close to Singapore, turned off its sign, and tried to flee earlier than being caught by Malaysia’s coastguard.
