Russia’s Shadow Fleet: Overview
The Financial Times has conducted an investigation into how Russia’s “shadow fleet” acquires vessels to transport oil beyond the reach of Western sanctions. The shadow fleet, which consists of over 400 tankers, generates billions of dollars in revenue for Russia’s war in Ukraine.
Key Examples and Financial Maneuvers
One key example is the Canis Power, a 2005-built tanker that was added to UK and EU sanctions lists in June after it lost power off Denmark’s coast. The incident highlighted concerns about the unknown ownership and potential risks associated with these vessels.
The investigation reveals that Lukoil, Russia’s second-largest oil producer, used its shipping arm to finance John Ormerod, a 74-year-old British accountant, to acquire at least 25 second-hand tankers between December 2022 and August 2023. The total cost was over $700 million. Each ship was bought by a different special purpose company incorporated in the Marshall Islands, while Lukoil’s Dubai-based Eiger Shipping DMCC provided the funds by paying in advance to charter the vessels.
Management and Operations
Dubai-based companies linked to Muhammad Tahir Lakhani, a Karachi-born British shipping magnate, were appointed to manage the ships. Lawyers and shipbrokers, including London-listed Braemar, facilitated the purchase of the vessels, leading to the enlargement of Russia’s fleet.
Impact and Challenges
The transactions show how Lukoil was able to fund the acquisition of a fleet of vessels while hiding its involvement from public view. The 25 ships have transported some 120 million barrels of oil from Russia since they were acquired, generating an estimated $7.2 billion in exports at a conservative estimate of $60 per barrel.
The investigation highlights the complex set of arrangements used by Lukoil to acquire and manage these vessels, which has allowed it to evade sanctions and continue exporting oil. While the transactions do not appear to have broken any laws, they demonstrate the creative ways in which Russia has been able to circumvent Western restrictions on its oil exports.
Jurisdictions involved include the UK, EU, Marshall Islands, and Dubai. The article also highlights the challenges faced by Western governments in identifying who owns these vessels, how they were acquired, and who oversees their operations due to the use of offshore corporate structures.
The industry impact is significant, with Russia’s shadow fleet generating billions of dollars in revenue for its war in Ukraine. The investigation suggests that Western governments may need to develop new sanctions mechanisms or legal frameworks to address this issue and prevent further evasion of restrictions on Russian oil exports.
Original Article: How Russia’s ‘shadow fleet’ gets its ships — Ft