The shadow fleet transporting Russian fossil fuels poses two significant challenges. In the first instance, the shadow fleet enables Russia to circumvent the G7/EU oil price cap, to maintain its fossil fuel export revenue, and consequently to fund its war in Ukraine. In the second instance, it is likely only a matter of time before an incident involving an ageing and uninsured shadow fleet vessel occurs that causes an environmental catastrophe with significant economic costs to be borne by affected coastal countries and/or the international community. Urgent action is necessary to make Russian shadow fleet operations unviable.
Policy recommendations
Targeted sanctions
- Designate all shadow fleet vessels, their owners, operators and managers.
- If sanctioned vessels continue to operate – designate key persons and entities that continue to engage with sanctioned vessels, namely:
- Vessels and owners/operators that engage in ship-to-ship (STS) transfer operations with designated vessels.
- Ancillary maritime service providers that engage with sanctioned vessels (e.g. tugboats, port operators, storage facilities, fuel providers).
- Senior crew members (e.g., captain, navigator) operating on sanctioned vessels.
- Buyers, brokers and intermediaries that deal with sanctioned vessels and their cargo.
- Designate third country facilities that blend or mask Russian-origin oil/oil products.
Sectoral sanctions/bans
- Ban ship-to-ship (STS) transfers of Russian crude oil and oil products in territorial waters and Exclusive Economic Zones (EEZs) and ancillary maritime and other services to such operations wherever they take place.
- Ban import of refined/processed oil products made from crude oil of Russian origin.
Environmental and safety measures
- Require proof of adequate P&I insurance cover for all oil tankers entering territorial waters, EEZs and international straits.
- Raise and enforce minimum environmental and safety requirements for oil tankers entering territorial waters, EEZs and international straits.
- Enforce compliance with International Maritime Organization (IMO) sulphur oxide fuel standards.
Anti-espionage measures
- Identify shadow fleet vessels involved in surveillance/espionage activity and prevent their passage through territorial waters and international straits.
Enhanced due diligence requirements
- Regulate for greater transparency and due diligence standards, including requiring proof of price-cap compliant sale contracts backed by bank-verified statements to obtain insurance and other services.
