The Black Fleet: An Introduction to Shipping Sanctioned Oil in 2023

It has been precisely 371 days since a G7 oil cap took effect limiting the price levels at which Russian oil could be bought and sold in the world’s largest economies, finally agreeing in the fifth of December in 2022 on measures designed to punish Moscow for the invasion of Ukraine and to cripple an industry that fuels the Russian war effort in Ukraine. But, widely discussed is the efficiency of achieving these goals themselves. While land transit routes such as pipelines stretching towards China and Central Asia are a component of the Russian sanction evasion strategy, it is complemented by a shadow fleet of tankers operating on sketchy legal grounds that deliver discounted oil overseas to markets difficult to reach via land. Unsurprisingly, amidst sky-high oil prices reaching 100$ per barrel of crude in 2022 and averaging approximately 85$ per barrel in 2023 (MarketWatch), the opportunity to buy cheaper Russian oil at a discount proved to be enticing for a number of both major and minor economies at prices not below the imposed oil cap but not exactly on par with global prices either, giving rise to several risk-taking companies willing to operate semi-legal fleets to reap a sanctions premium, which has risen to record highs as the price of Russian oil consistently stood above Western-imposed price caps (Hellenic Shipping News). According to Hellenic Shipping News’ investigation, these premiums went to the pockets of European maritime traders before the rise of Russian oil prices to levels above the price cap, after which the premium was transferred to shadow fleet owners due to Western withdrawal from the Russian market.  Some portion of he premium earned was also funnelled back to Russia, especially by fleet owners associated with Russia itself. Furthermore, the move of mainstream Western shipping has increased competition in non-Russian oil and gas routes, decreasing the benefit of operating in this sector (Hellenic Shipping News) that might have given smaller operators to take risks by operating in Russia due to their inability to compete with larger or more efficient competitors. In this article, we will inform you on the shadow fleet, how it operates and why it is in a legally grey area. 

The Modern Shadow Fleet

Sanctions evasion itself has existed as long as sanctions have been used as a geopolitical tool to hit back against adversaries of a state, in various and constantly evolving forms as technology progresses. Naval smuggling has been a widely used method to circumvent blockades and restrictions since Ancient Rome and has evolved in response to changes in legal frameworks and commercial technologies. However, in the 20th and 21st Centuries, developments in surveillance technology as well as new financial structures caused the employment of open smuggling as a state-sponsored tool of sanctions evasion to give way to operating a fleet of merchant vessels in a legally grey zone, commonly by using shell companies and flags of convenience, giving rise to the so-called “ghost fleet” or “shadow fleet”. 

The history of the shadow fleet stretches well before the onset of Russian aggression against Ukraine, and in some cases, before the Russian Federation itself. Iran has been using a shadow tanker fleet to ship its abundant oil resources at a discount since the imposition of US sanctions following the Islamic Revolution in the 1970s and had the most highly sanctioned shipping sector before the Russian Invasion of Ukraine. More recently, Venezuela also enticed international ship owners to operate a shadow fleet to buy its cheap oil after having its oil industry subjected to US sanctions. However, mass sanctions imposed on a major economy with high market power in fossil fuels as well as the maritime delivery of them increased the size of the global shadow fleet by multiples. S&P Global Market Intelligence predicted in March that 443 vessels are operating within the Russian shadow fleet and estimated that approximately 1900 international ships (majority Greek-owned) are under sanctions risk for conducting questionable activity. An S&P report written in May also found out that the number of shadow operators has been constantly increasing since 2022 despite tighter sanction regimes. 

The Grey Area

Contrary to expectations, the main reason behind the “illegality” of the Russian shadow fleet does not lie in the fact that the fleet is evading sanctions. In fact, last year, the Secretary of the US Treasury Janet Yellen directly stated that the US found it acceptable for India, China, or any African state to buy Russian oil at prices above the oil cap as long as Western service providers were not involved in the transactions (Reuters). 

The main rationale behind hurting Russian profits via the price cap lies in the fact that Russia will be forced to sell its oil at a discount to entice buyers to take reputational risks as well as being forced to limitations with regards to the amount of oil and gas it can transport overseas by legal and reliable means, something which Russia is actively trying to make up for by building up a shadow fleet. Thus, unlike the sanctions imposed on Iran, the intention of the current sanctions regime is not to completely isolate the Russian energy industry but to cut down the energy revenues going to the Russian government as much as possible while preventing any energy shocks in the market in a way that would not upset the Global South and major fence-sitters like India that pursue a balancing strategy to protect their economies from the economic aftershocks of the war. Given that there were significant conflicts with many developing countries over how the war affected the grain trade to countries suffering from food insecurity, neither Russia nor the West is keen on further inflaming economic tensions with third parties and regional blocs that carry diplomatic weight. Hence, to not turn these third parties hostile to their causes and lose them as trade partners or diplomatic supporters, both Russia and the West have shown varying degrees of restraint on economic measures. As a result, an UN-brokered grain trade agreement was concluded in 2022 and both sides refrained from implementing extremist punitive measures that affected third countries, such as secondary sanctions or total export bans on critical commodities including oil, which makes the act of trading Russian oil with third parties technically outside of sanctions violation if such trade was made without the use of EU or US service providers.

However, there is no doubt that most shadow vessels operate outside internationally agreed regulatory standards, which is not legal. Shadow fleets employ old and badly maintained vessels to a large extent, which is also comprehended by the fact that Russian shipbuilders are facing an acute shortage of quality parts and shipbuilding materials (Reuters, Paris) that can cause a reduction in safety, possibly in breach of international regulations on environmental protection and maritime shipping safety standards. The withdrawal of Western credited insurance providers is particularly damaging in this case, as the withdrawal of seaworthiness and safety service provision from vessels employed within the shadow fleet (Reuters) means there is only patchwork oversight from service providers with low transparency and of unreliable financial status (Politico). An additional speculation could be raised with regards of how safety standards are enforced at the ports of call of the shadow fleet, as countries (especially Russia) can have a genuine interest in turning a blind eye to safety violations to keep cheap oil flowing. Also note a recent development: The International Maritime Organization, the UN agency enforcing international shipping regulations, have targeted the shadow fleet for conducting unsafe activities at sea and to adhere to measures that prohibit or regulate the transfer of cargoes between ships at open seas, a common measure deployed when conducting sanctions evasion at sea between vessels of the shadow fleet and traditional carriers (Reuters). In addition, it is common practice for vessels to obfuscate their origins, ports of call and the price of their cargo when engaging in sanctions evasion, and there is evidence that such measures were taken even by some EU-based ship operators (Politico). 

In conclusion, due to a mix of regulatory deficiencies and soft sanctions regimes especially when different third-party jurisdictions and the question of law enforcement within neutral international waters are concerned, the shadow fleet is well within a grey zone of operations. Operating a shadow fleet for evading sanctions imposed by a select few jurisdiction areas are not as illegal or a felony crime as direct smuggling, but not as legitimate as traditional shipping operations, and shadow fleet operations nearly always involve breaking agreed international safety standards as well. 

Did It Work?

Probably the most heated discussion topic concerning policies mentioned in this article, the effectiveness of the shadow fleet in allowing Russia to maintain stable energy revenues is still an ongoing debate, particularly as developments in both the war and the sanctions regime are continuously occurring. Remember that the price cap regime had two main targets: To maintain price stability in the global energy markets by not isolating Russia completely while limiting the revenue the Russian government earns by selling energy sources and oil. 

It is easy to see that the policy was successful on the first front. Perhaps by too much. Steep discounts at the prices of Russian oil have driven up demand for it as it appeared as a cheaper alternative to more expensive crude exported by the West and Middle Eastern producers. Russia is now the market leader in oil for both China and India, which do not enforce sanctions, with the latter now receiving about 40% of oil from Russia when compared to a virtually negligible Russian market share before the war (Wall Street Journal). This increasing volume of oil shipments to two of the world’s biggest fossil fuel users reflected the second target of the oil cap regime: Prices. Around the end of June, Russian crude prices surged above the price caps set by G-7 and other Western states before returning to be slightly above the price cap after the first US enforcement action conducted this November (Wall Street Journal). However, note that the observed reduction also reflects the trend toward lower prices seen in Western crude oil prices (Wall Street Journal) hence analysts might also interpret the reduction in Russian prices as a simple reflection of a global trend, in line with an International Energy Agency expectations of decreasing oil demand for 2024 that raised market concerns regarding oversupply (Wall Street Journal). 

Also looking from the perspective of Russian export revenues, despite a significant decrease at the beginning, revenues bounced back after failures to enforce the price cap in which the shadow fleet played a critical role (Wall Street Journal). Revenues from export taxes related to the sale of oil and gas in October 2023 have increased by more than a quarter when compared to last October when the price cap was not imposed yet by the G-7 states and their allies according to its federal budget. This was widely attributed by the multiple outlets and databases to be the result of Russia’s newfound ability to transport oil by leveraging the newly assembled shadow fleet to overseas jurisdictions where the price cap regime is not enforced by the relevant authorities. 

Overall, the shadow fleet has been greatly effective at allowing Russia to continue selling its oil abroad and helped to shore up its war economy despite Western oil sanctions, which despite initial success proved to be ineffective to new Russian strategies developed revolving around the shadow fleet especially as enforcement action taken was limited.


In conclusion, it should be clear that inadequate enforcement and the unwillingness of third countries to cooperate on enforcing the price cap within their jurisdictions have strongly eroded the effectiveness of the price cap, allowing Russia to leverage a shadow fleet operated by premium-seeking shippers for its national interest and economic benefit. Further restrictions such as a ban or regulation of the sales of second-hand tankers are likely to greatly decrease the speed of growth of the shadow fleet, but it is unlikely that there is political will amongst states to do so at the moment: The US is heading into a highly polarized election season this year around when the EU will be holding its parliamentary elections. In addition, any regulations on the shipping industry are bound to be vehemently opposed by Greece and Cyprus, who as the home of the EU’s biggest maritime shipping companies, stand to suffer disproportionately if additional shipping regulations are enacted. 

However, the recent gradual enforcement of sanctions by the US might signify a reversal of the loose enforcement of the price cap, but the effect of this action remains to be seen as it was taken very recently, especially as it came during a time when the energy markets were responding to oversupplying concerns following the IEA’s publication of its prediction on the global oil demand outlook for 2024. Furthermore, there is also political uncertainty within the US: Speculation is rife about how a potential Trump return next year may upend the sanctions regime. Overall, the effect on the shadow fleet of recent enforcement action remains to be seen.


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Emre Oktav
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