How a shadow fleet secretly carries Russian oil Due to US sanctions: Swiss company Solway closes operations in Guatemala

Russian oil – rejected in the West, otherwise welcome. With the war in Ukraine and associated sanctions, the country with the world’s second largest export of crude oil had to restructure. While Europe has rid itself of Russian oil, Asian countries have struck.

For example, China has been importing 1.9 million barrels (approx. 300 million liters) of Russian oil per day since 2022. That is 19 percent more than last year, according to the International Energy Agency IEA. India has increased oil imports even more: an average of 140 million liters of oil per day, almost 8 times the pre-war imports. Previously, the country on the Ganges obtained the most oil from the Middle East.

In January 2023, Russian exports to China and India reached a record high. Prices for crude oil from Russia are currently extremely low due to sanctions and diesel and petrol are expensive. China is taking advantage of this and has massively ramped up its own manufacturing industry.

Longer routes, more ships

But how does Russia deal with the new structures? The transport routes to Europe are considerably shorter than to Asia – mainly because most of the Russian export ports and oil terminals are located in the west. According to a report by “CNN”, the Russian fleet is not sufficient to meet the entire need for oil tankers. About four times as many tankers are needed as before the war. This is where the “shadow fleet” comes into play.

Experts estimate that this fleet consists of about 600 ships, about 10 percent of all tankers worldwide. And the number continues to grow. Who owns these ships and who operates them is a mystery. Richard Matthews, chief research officer at EA Gibson, an international freight forwarder, divides the global oil system into two parts:

But the “Russian” fleet is also not homogeneous, says Matthew Wright of the data analysis company Kpler. He divides them into “gray” and “black” ships. After the start of the Russian invasion, gray ships were sold – mostly by Europeans to companies in the Middle East and Asia that had previously had nothing to do with oil transport.

Black ships, on the other hand, have long been in the oil trade: they have already been used by Iran and Venezuela to circumvent Western sanctions and continue to export crude oil. Many of these vessels have a habit of turning off their AIS transceiver, literally operating “under the radar”.

“Shadow fleet” continues to grow

Actually, it shouldn’t be. While Western countries have banned most oil imports from Russia, the transportation of Russian oil has not been banned for Western companies either. The only condition is that the price caps of the G7 are respected. In January ships owned by Europeans carried 36 percent of all Russian crude oil.

But what happens if the price caps are not met? The risks are great: no western shipping company intends to mess with the G7, the reputational and wallet damage would be too great.

Therefore, an estimated 25 to 35 ships are sold to the Shadow Fleet each month. Global Witness, a non-profit organization, estimates that about a quarter of all ship purchases in January were made by unknown individuals. Demand for tankers for Russian exports could continue to rise in the coming months: depending on how much China can boost its post-corona economy, more Russian oil will also be imported.

Dangers not only for the economy

So who is behind this “shadow fleet”? Some suspect that the Russian state or individuals close to the state are behind certain companies that suddenly became involved in oil transportation, says Sergei Wakulenko. He used to work on the executive floor of a Russian oil company.

The EU imposed sanctions on “Sun Ship Management” last weekend. The company belongs to Sovcomflot, one of the largest Russian freight companies. The EU argued that the company, registered in Dubai, “acted as one of the key players in the transportation of Russian crude oil”. The Russian state is the main beneficiary of these actions.

In addition, this “shadow fleet” makes it easier for Russia to circumvent sanctions, as Venezuela and Iran have already done. Experts including Wakulenko have found evidence that “Ural”, Russia’s main oil variety, is being sold in many places for more than G7 price caps allow.

And last but not least, the “shadow fleet” also poses a risk to the environment:

Many of the black ships are said to be over 15 years old. Normal shipping companies usually take ships of this age out of service because wear and tear then becomes a safety risk. But now more and more of these old tankers are sailing the world’s seas. And chances are they’re not maintained as they should be, Richard Matthews tells CNN.