Russia’s Shadow Fleet: An Overview
Thanks to hundreds of old tankers, Russia manages to sell oil worldwide, earning up to a third of its budget from this trade.
Until February 2022, Russia was a full-fledged member of the global oil market, exporting its oil products to numerous countries under generally accepted rules. However, after the start of the full-scale invasion of Ukraine, sanctions were imposed on the industry, and several countries stopped accepting Russian oil. This hurt the industry, prompting the Kremlin to take measures to save it. One such measure was the creation of a shadow fleet to transport Russian oil. So what is the shadow fleet, and what threats does it pose?
What Is the Shadow Fleet?
The term “shadow fleet” refers to vessels, usually oil tankers, with complex ownership structures that often turn off their location transponders or falsify their coordinates during voyages. This fleet is often divided into “gray” and “dark” categories, depending on certain characteristics and the type of oil they carry. The “gray” fleet typically hides the owner, while the “dark” fleet hides the origin of the oil products. All other fleets are considered “clean” or “cleared fleet.”
The concept of a “shadow fleet” existed before Russia began using it. It was initially used to describe tankers transporting oil from Iran and Venezuela when those countries faced sanctions on oil exports.
Characteristics and Threats of the Shadow Fleet
These ships often lack insurance from reputable British insurers, and some have no insurance at all. This creates the risk that in case of an accident, there would be no party responsible for addressing the environmental consequences like an oil spill.
Additionally, these tankers are typically old, making accidents a matter of time. VOX reports that for the first time in years, maritime safety conditions have deteriorated rather than improved. Despite this, demand for such tankers remains due to the availability of buyers.
Without insurance and facing sanctions, these vessels are barred from some ports, leading them to conduct oil transfers at sea, mixing Russian oil with oil from other countries to obscure its origin. Such at-sea transfers are considered a potential source of accidents.
Estimates suggest that 10% to 18% of the world’s tankers make up the shadow fleet. With around 9,800 to over 12,000 tankers globally, about 1,500 to 1,800 belong to the shadow fleet.
The exact number of tankers involved in transporting Russian oil is unknown, as estimates vary. The construction of this fleet began at the end of 2022 when Russian oil companies started buying old tankers to form their own fleet. Prices for a single tanker ranged from $35 million and up, depending on the urgency and the seller’s willingness to transfer the vessel to Russia.
By the end of 2022, Russia reportedly had over 200 tankers. By March 2023, CNN reported about 600 tankers of various capacities. Today, Russia may directly or indirectly control 1,400 to 1,800 tankers, making it the largest operator of a shadow fleet.
It’s important to note that not all of these vessels are constantly transporting Russian oil. Experts include a tanker in the count if it has even once transported Russian oil, violating the imposed restrictions, such as the $60 per barrel price cap aimed at limiting Russia‘s foreign exchange earnings used to fund its military and the war.
One of the primary concerns is the lack of insurance coverage in case of accidents, raising the potential for ecological disasters. Legitimate fleets are insured by major internationally recognized insurers, ensuring clear plans for addressing accidents and providing compensation. The shadow fleet, however, is often insured by local companies with limited coverage. For example, Russian insurer “Rosgosstrakh” provides insurance to some tankers in the shadow fleet.
Another concern is the potential for at-sea oil transfers, which could lead to environmental disasters or even terrorist attacks. The lack of transparency and accountability surrounding these vessels makes it challenging to track their activities and ensure compliance with international regulations.
The global implications of Russia‘s shadow fleet are far-reaching. It poses a threat to global energy markets, as the lack of transparency and regulation creates uncertainty about the origin and quality of oil products. Additionally, the environmental risks associated with accidents or spills could have devastating consequences for ecosystems and human populations.
Original Article: How Russia’s Shadow Fleet Saves the Country’s Oil Industry and the Threats It Poses to the World — United24Media