Russian Shadow Fleet Grows to 435 Tankers, KSE Institute Reports
The KSE Institute has released a study titled “Assessing Russia’s Shadow Fleet: Initial Build-Up, Links to the Global Shadow Fleet and Future Prospects,” which reveals that Russia’s shadow fleet currently consists of 435 tankers. This fleet is designed to circumvent sanctions on Russian oil by creating transport capacity independent of Western maritime services.
The report highlights the significant growth in Russia’s reliance on the shadow fleet, with 83% of crude oil and 46% of petroleum products shipped on these vessels in April 2024. This represents a major challenge for two reasons: (1) The shrinking role of the mainstream fleet fundamentally undermines the leverage of the price cap. (2) The shadow fleet largely consists of ageing and un-/underinsured vessels which pose a significant and rising threat to the environment.
Origins, Size, and Operations of Russia’s Shadow Fleet
The report investigates the origins of Russia’s shadow fleet, its current size and operations, position within the global shadow oil trade, Russia’s needs to fully bypass sanctions, its ability to counteract vessel designations, as well as prospects for the fleet’s future expansion. The report also offers detailed policy recommendations to rein in the shadow fleet.
According to the study, as of Q1 2024, 435 vessels are part of the Russian shadow fleet – they are not owned, managed or insured by an entity in the sanctions coalition and thus the price cap does not apply to them. 185 are transporting crude oil and 250 products.
Channels Used by Russia to Establish its Shadow Fleet
To establish its shadow fleet, Russia used three key channels: (1) transfer of tankers previously owned by Russian entities to new managers; (2) 15+ year old vessels from the white fleet, i.e., with IG P&I insurance; and (3) very old vessels (20+ years) from the shadow/white fleets that would have otherwise been decommissioned.
Only a small share of the current Russian shadow fleet was built by transferring vessels from other segments of the global shadow oil trade (e.g., Iran, Venezuela).
Potential for Expansion
We estimate that ~500 Aframax equivalent crude oil tankers – mostly from the white fleet – are potentially available for expansion. For oil products, we assess that ~1,200 Seawaymax equivalent vessels are available for further growth.
This assessment only reflects the theoretical availability of vessels and does not reflect specific challenges Russia may face, for two reasons: (1) Russia has already spent ~$8.5bn on the shadow fleet and additional financing may be hard to secure; (2) the EU has recently introduced legislation aimed at cracking down on the sale of mainstream tankers into the Russian shadow trade.
Policy Recommendations
To address the existing Russian shadow fleet, KSE Institute recommends:
Continue and expand vessel designation campaign, which has proved to be extremely successful. Authorities should prioritise the vessels most heavily used for the export of Russian crude oil from Baltic and Black Sea ports to India and China.
Make shadow fleet operations difficult and costly by requiring all vessels entering coalition ports to disclose information about their mandatory oil spill (P&I) insurance and by banning the sale of spare parts for use by shadow fleet tankers.
Enforce existing oil spill insurance requirements to address the significant and rising environmental threat stemming from ageing and uninsured shadow fleet tankers without removing transport capacity and, in turn, affecting global oil supply.
Step up investigations and impose significant fines to alter risk perceptions by all actors involved in shadow fleet operations and thereby drive up costs for Russia. Focus on opaque ownership structures and STS operations.
Original Article: KSE: Assessing Russia`s shadow fleet — Intellinews