Despite sweeping efforts by the West to cripple Russia’s ability to profit from oil exports, Moscow’s shadow fleet has surged by 70% in the past year. This clandestine network of old, underinsured oil tankers now plays a pivotal role in keeping Putin’s war machine well-funded, allowing the Kremlin to continue its aggression in Ukraine.
The growth of this fleet reveals a glaring problem: sanctions, though impactful, are not foolproof. The cracks in the current framework allow Russia to exploit loopholes and avoid the full brunt of restrictions designed to cut off vital revenues. The need to fix these loopholes has never been more urgent.
A report by the Kyiv School of Economics (KSE) underscores the worrying trend. Russian oil exports carried by this fleet have skyrocketed from 2.4 million barrels per day in June 2023 to a staggering 4.1 million in June 2024. These ships, many of them aging and underinsured, are skirting sanctions and posing a dual threat: they fund the Kremlin’s war chest while increasing the risk of environmental disaster in European waters.
Western nations, including the US, Canada, Japan, and European allies, have targeted global insurers and shipping companies to throttle Russia’s oil transport capabilities. Yet, despite these efforts, Moscow has adeptly circumvented the sanctions, piecing together a fleet of older vessels, many lacking proper maintenance and insurance, to sustain its oil exports.
Benjamin Hilgenstock, co-author of the KSE report, points out that while sanctions have been effective, the efforts have been “too limited” to curb Russia’s shadow fleet completely. Russia has invested an estimated $10 billion to assemble this fleet, which now handles 70% of its seaborne oil. Most of this crude oil trades well above the $60-per-barrel price cap imposed by Western countries, proving that the price controls are being evaded.
The situation not only allows Russia to fill its coffers but also raises severe environmental concerns. These aging tankers, averaging 18 years old, are poorly maintained and frequently lack adequate insurance. The environmental threat posed by these vessels is stark. Many ply busy European waters, including the Baltic Sea and the Danish Straits, amplifying the risk of an oil spill or accident that could have catastrophic consequences for neighboring countries.
In fact, several accidents involving Russia’s shadow fleet have already occurred, foreshadowing the potential for disaster. One incident in March saw a 15-year-old tanker, the Andromeda Star, collide with another vessel near Denmark. Luckily, no oil was spilled at the time. However, the risk continues to grow as the fleet expands.
KSE’s report calls for stricter enforcement of sanctions and proposes the creation of “shadow-free” zones in European waters to mitigate the environmental threat. Without more decisive action, a major disaster is “only a question of time,” the report warns.
Moreover, the murky ownership of these vessels complicates the situation. Many are registered under grey-listed flag states and owned through labyrinthine corporate structures, often involving intermediaries in places like the UK and Dubai. This lack of transparency makes accountability nearly impossible and only emboldens Russia’s ability to dodge sanctions.
The bottom line is clear: sanctions must be tightened, and enforcement mechanisms strengthened to prevent Russia from using its shadow fleet to fund the war in Ukraine. If the West allows these loopholes to persist, it risks not only prolonging the conflict but also facing the fallout from a major environmental catastrophe.
