Shedding light on “shadow” tankers

Who transports Russia’s oil 18 months into the invasion?

Since the first sanctions on Russian oil came into effect in December 2022, stories about “shadow fleets” used by Russia to circumvent the sanctions have circulated in the media.

Following months of speculation about this possible fleet of “shadow” tankers transporting Russia’s oil, the Centre for Research on Energy and Clean Air (CREA) has published a briefing taking a closer look at who exactly is transporting Russia’s oil 18 months into the invasion of Ukraine. Contrary to some previous reports, CREA’s analysis finds that there is little evidence that there is a coordinated “shadow fleet”. There are however a growing number of tankers owned and insured in countries not implementing the price cap policy transporting Russian oil and thus circumventing the policy. These tankers are referred to as “shadow” tankers in this briefing.

Since Russia’s full-scale invasion of Ukraine, CREA finds that the volume of Russian oil transported by “shadow” tankers has more than doubled, increasing further after sanctions were implemented. Before Russia’s invasion of Ukraine, 13% of oil tonnage departing from Russian ports was transported by “shadow” tankers. As of July 2023, this has more than doubled by volume, with 42% of all oil from Russia transported using “shadow” tankers.

This is exactly the kind of analysis we need. The Russian economy is doing fine, despite all the supposed sanctions that have been imposed. CREA reveals a key piece of what is going. This should be required reading in all western governments.”

Simon Johnson, MIT Sloan School of Management

The rising role of “shadow” tankers has been largely driven by more voyages from Russia rather than a rise in the number of “shadow” tankers. Following the implementation of sanctions, “shadow” tankers voyages transporting Russian oil increased by 82%.

Despite the growth in Russian oil transported on “shadow” tankers, Putin is still incredibly reliant on tankers that legally must comply with the price cap policy to transport the majority of Russia’s oil. “Shadow” tankers transported 36% of all Russian oil exports in volume terms (37% of crude and 30% of oil products and chemicals) since the EU oil embargo and price cap were imposed on 5 December 2022.

Yet, tankers owned/insured in price cap imposing countries continue to transport Russian oil, even when the Ural prices went above the price cap in April and remain above the USD 60 per barrel price cap level since July 2023. This shows evidence of poor monitoring and enforcement of the cap.

Allies of Ukraine must do more to deprive Putin of the ability to fund the war against Ukraine through the sale of Russian oil. The build-up of “shadow” tankers should be prevented by restricting the sale of tankers to operators who don’t comply with the price cap policy. The oil price cap should be strengthened by making penalties for sanction violations significantly stricter, lowering the price cap level to USD 30 per barrel and greater monitoring such as requiring enhanced protection and indemnity (P&I) insurance disclosure.

CREA also recommends that wider measures be imposed on Russia including a ban of LNG, pipeline gas, pipeline oil and banning the import of refined petroleum products from refineries running on Russian crude.

“The policy recommendations presented in this publication are critical for the effectiveness and credibility of the energy sanctions regime—especially in times of rising prices for Russian exports.  Significantly lower price caps on Russian crude oil and petroleum products, stricter enforcement of existing restrictions, including through improved information exchange and stepped-up documentary evidence requirements, as well as measures to curb Russia’s ability to build a sanctions-proof fleet are key to maintain pressure on the country and bring the war to an end.”

-Kyiv School of Economics (KSE)

Isaac Levi, Europe-Russia Policy & Energy Analysis Team Lead; Petras Katinas, Energy Analyst; Lauri Myllyvirta, Lead Analyst; Karthikeyan Hemalatha, Communications Specialist