Regulatory Pressure and Commercial Arbitrage
Entities linked to Russian, Iranian, and Venezuelan oil exports are accelerating a targeted fleet renewal strategy. They are prioritising the purchase of Very Large Crude Carriers (VLCCs) around 15 years old while sending vessels older than 24 years for demolition. This approach aims to maintain sanctioned export flows while limiting technical and legal exposure to Western regulations.
The tightening of sanctions, including the blacklisting of Rosneft and Lukoil, has increased scrutiny of tankers involved in Russian flows. Simultaneously, the entry into force of the Hong Kong Convention on ship recycling, set for June 2025, introduces new standards for demolition yards in India, Bangladesh, Pakistan, and Turkey. In this context, the partial fleet renewal meets the expectations of second-tier insurers, Asian ports, and specific buyers, while preserving operational capacity.
Actors, Vessels, and Resale Circuits
VLCCs aged 15 to 20 years, cheaper than newer units but still economically viable for several years, are sold by independent shipowners based in Greece, the Middle East, or Asia. These vessels are transferred to opaque structures via shell companies in Hong Kong, the Emirates, or Caribbean jurisdictions. At the same time, older vessels are directed to Hong Kong Convention-compliant yards, with increased caution to avoid secondary sanctions.
The sale of these vessels is facilitated by a network of intermediaries and brokers who connect buyers and sellers across various regions. This complex web of relationships allows for the discreet transfer of ownership, making it challenging for authorities to track the movement of these tankers.
Market Impact on Pricing and Logistics Chains
Strong demand for 15-year-old tankers is sustaining elevated second-hand market prices. This squeeze limits availability for conventional operators, particularly on marginal routes. Asian refiners must contend with extended delivery times and higher logistical costs due to indirect routes and multiple Ship-to-Ship (STS) transfers aimed at avoiding inspection zones.
The increased cost of logistics and the scarcity of suitable vessels are driving up prices for crude oil, making it more expensive for consumers. This development is particularly significant for countries that rely heavily on imported oil, such as Japan and South Korea.
Financial Implications and Maritime Compliance
The risk profile of second-hand vessel transactions is shifting rapidly. European and Japanese banks are pulling back, prompting buyers to turn to private, often unregulated funding sources. Meanwhile, demolition yards must enhance their compliance procedures to avoid sanctions risks. This creates new demand for specialised maritime due diligence services such as Know Your Customer (KYC) screening.
The increased reliance on private financing is driving up costs and creating a more opaque market. This shift also raises concerns about the potential for money laundering and other illicit activities in the shadow fleet.
Resilience of Flows Despite Sanctions
The sustained export volumes from Russia, Iran, and Venezuela, despite growing restrictions, confirm the resilience of the shadow fleet. The pivot to Asia, combined with more selective management of vessel age and traceability, allows continued market access while anticipating further Western measures targeting the ships themselves, alternative insurers, and flags of convenience.
The ability of the shadow fleet to adapt and evolve in response to changing circumstances is a testament to its resilience. As long as there remains a demand for crude oil, the shadow fleet will continue to find ways to maintain its operations, albeit in an increasingly complex and opaque environment.
Original Article: Shadow fleet renews tankers to bypass sanctions and operational risks — Energynews