Russia’s Ghost Fleet or How Moscow Is Dodging Oil Sanctions

Since the invasion of Ukraine, Russia has been the target of a series of severe economic sanctions by Western countries, especially the European Union. Among the most stringent measures, the cap on oil prices and export restrictions have directly hit the Russian economy with the aim of weakening it and, consequently, reducing the military power of the Kremlin. However, despite these international efforts, Moscow has found a way to keep its hydrocarbons flowing thanks to an armada of poorly controlled and often anonymous ships, which journalists call the “ghost fleet”.

The “Ghost” Fleet: A Hidden Armada to Bypass Sanctions

Since the implementation of sanctions in 2022, Russia’s oil and gas exports have been hit by price caps and transportation bans. The G7 countries, the European Union and Australia have imposed a price cap of $60 per barrel for Russian shipments, with sanctions threatening any carrier or insurer that fails to meet the cap. However, Russia has quickly responded by deploying a complex strategy involving the use of a fleet of ships under flags of convenience and the use of shell companies.

According to a Financial Times investigation, Russia's ghost fleet now comprises more than 400 ships, carrying the equivalent of 4 million barrels of oil a day. These often older ships are operated through companies based in offshore jurisdictions, such as Dubai.

A growing threat to marine ecosystems

Ageing ships and a lack of insurance pose a serious environmental hazard. In March 2024, the oil tanker Innova left a 23-kilometer-long trail of oil off the coast of Scotland, causing an oil spill. “The Innova is among hundreds of ships that make up Russia’s ‘ghost fleet,’ an armada of often old and poorly maintained vessels that sail in defiance of Western sanctions and pollute unchallenged,” Politico wrote in its investigation. Many of the clandestine fleet’s vessels, poorly monitored and often without reliable insurance, pose a similar risk of accidents, threatening marine ecosystems around the world.

Experts from the NGO Source Material, cited by Politico, have in fact reported that many ships in the ghost fleet do not meet international safety standards. The reason? Since they are no longer insured due to international sanctions, the ships are no longer inspected, certified or repaired.

Strengthened sanctions and new camouflage tactics

Faced with this worrying situation, the United Kingdom decided to tighten its sanctions in October 2024. Eighteen more oil tankers and four LNG tankers were added to the list of targeted ships, dealing a severe blow to Moscow's efforts to circumvent the restrictions. However, Russia continues to use sophisticated strategies to hide the identity of its ships, using shell companies and frequent flag changes.

An investigation by Bloomberg revealed that ships in the Ghost Fleet are regularly sold and bought back under new identities through intermediaries. Financing for some of these transactions was reportedly provided by Eiger Shipping DMCC, a subsidiary of Lukoil, a Russian oil giant based in the United Arab Emirates.

Insurance: a crucial point

Another aspect of Russia’s strategy to circumvent sanctions is to resort to smaller and less demanding insurance companies. Indeed, most large European and American insurers, under pressure from regulators, refuse to cover Russian ship cargoes above fixed price ceilings, or not at all. Russia’s major incumbent insurers are also threatened by sanctions, such as those recently imposed by the United Kingdom. This has led Moscow to turn to insurers based in third countries, with less stringent safety standards. The risk of unpaid claims is therefore significant.

How to identify and manage this clandestine fleet?

Tracing the ships of the Ghost Fleet remains a huge challenge. Frequent changes of flag and ownership complicate the authorities’ efforts to track Russian cargo. Western governments, as well as NGOs like Source Material, recommend several actions to limit the effects of this clandestine fleet: strengthening controls of international maritime registries; increased surveillance of financial transactions associated with maritime trade; and international coordination of insurance regulations.

The risks of environmental disasters being particularly high, a strengthened collaboration between maritime authorities, governments and environmental organizations is essential to respond to this strategic, commercial and environmental challenge.

Russia's ghost fleet can only exist because of the complexity of financial and maritime trade. Despite the West's efforts to limit Moscow's revenues, Russia manages to retain a portion of its exports through shady practices. If the sanctions imposed by Western countries are aimed at weakening the Russian economy, recent discoveries show that they are still being circumvented through sophisticated means. The international community must redouble its efforts and think more carefully about sanctions if they are to be effective.