Sanctions Lead to Rise in Russia's "Ghost Fleet" of Oil Tankers

The shadowy network of oil tankers known as Russia's "ghost fleet" has come under renewed scrutiny as Western sanctions intensify against Moscow's energy sector. Since Russia's invasion of Ukraine in February 2022, the number of oil tankers operating under obscure ownership or lacking proper insurance has surged, facilitating ongoing crude exports from Russia.

On Friday, the United States and the United Kingdom announced fresh sanctions aimed at crippling Russia's oil industry. The U.S. designated over 180 vessels and major Russian oil companies Gazprom Neft and Surgutneftegas as targets of these measures. The accompanying UK sanctions echoed these concerns.

A report from the Atlantic Council noted that previous sanctions targeting individual ships have had limited impact on reducing the size of the shadow fleet. Defined as vessels not owned by G7 countries or lacking sufficient protection and indemnity insurance, the ghost fleet has become central to Russia's efforts to bypass sanctions, joining similar tactics previously employed by countries like Iran and Venezuela.

The Kyiv School of Economics reported that approximately 17% of all oil tankers are now part of this shadow fleet. While Russian oil revenues decreased by $1.1 billion in November due to dropping prices and export volumes, the report highlighted the need for enhanced international cooperation to enforce sanctions and close legal loopholes that allow this fleet to operate.

Major risks associated with the ghost fleet include a lack of adequate insurance, which is critical for covering potential accidents or environmental damages. European Union and UK insurance markets account for about 95% of commercial P&I insurance, making the ghost fleet vulnerable but still operational due to Russia's efforts to establish independent maritime routes.

As the sanctions continue to evolve, the situation underscores the complex dynamics of global oil markets and the lengths to which Russia is willing to go to sustain its crude exports amidst international pressures.