From early in Russia’s war with Ukraine, the West hit Russia with economic penalties aimed at strangling its profits from oil sales. As Europe announces its 19th round of sanctions, an uncomfortable reality has sunk in.
Russia quickly found a workaround to profit from oil in spite of a price cap and import restrictions. By building up a huge fleet of dilapidated ships with hazy ownership that covertly shuttle its fuel to far-flung markets, it has managed to evade the sanctions and make money.
Now, it is becoming increasingly clear that the vast expansion of this shadow fleet comes with serious and potentially long-lasting effects. The rickety ships pose dire risks to the environment, and the trend has created a huge illicit shipping economy that some experts worry could outlast the war. That could pave the way for nations to continue skirting the existing order, with nations including Russia and Iran as shippers, and China and India as customers.
“A lot of people want to do the easy part — impose sanctions — but we’ve actually caused a bigger problem,” said Ian Ralby, an expert in maritime security and founder of the research firm I.R. Consilium. “The sanctions don’t put them out of business. They put them out of legitimate business.”
The shadow fleet accounts for about 17 percent of all in-service oil tankers sailing the ocean today, according to S&P Global Market Intelligence, a research firm. There were 940 ships in the fleet as of earlier this year, up 45 percent from a year ago, based on the firm’s estimates.
While there were some boats with dubious ownership and shipping practices in operation before Russia’s full-scale invasion of Ukraine in February 2022, they became far more common after the start of the conflict.
By late that year, Europe had banned Russian seaborne oil imports, which meant that the country suddenly needed India and China to buy its oil. With its vessels tied up on longer journeys to those farther ports, Russia needed more of them.
Russia also wanted to avoid a price cap. The Group of 7, the European Union and Australia had restricted companies from providing insurance and other services in cases where Russian crude oil was sold above $60 a barrel, a cap the European Union and Britain have since dropped even lower.
So ships affiliated with Russia began to use sketchy insurance or none at all. They started to fly third-country flags and to send false location information to cover up where they had loaded their cargo.
By making it harder to tell if oil had come from Russia, they created an air of plausible deniability for oil buyers.
As those ships have become essential to Russia’s oil economy, they have also created the risk of an oil spill or other maritime disaster. The average age of the ships is about 20 years, based on S&P data, compared with 13 years for the oil fleet broadly.
“Lack of insurance combined with the really old vessels — this just increases the risk of environmental catastrophe,” said Natalia Gozak, office director of Greenpeace Ukraine.
Nor is an environmental peril the only threat. Clandestine ships have been suspected of committing underwater sabotage — hitting pipelines or cables — and making it look accidental.
The shadow fleet comes with an even more obvious drawback. It has “limited the cap’s efficacy,” America’s Government Accountability Office concluded in a report this month, keeping money flowing into Moscow’s coffers and helping it to fund the war in Ukraine.
That doesn’t mean that the sanctions are a mistake, supporters say.
Ben Harris, a former Biden administration Treasury official and an architect of the price cap, pointed out that the sanctions, even if imperfect, cost Russia. It’s expensive to ship oil to India or China and to build up the shadow fleet.
“Enforcement is the real challenge,” he said.
For now, countries are applying even more sanctions to combat the shadow fleet.
The European Union has put more than 500 shadow-fleet ships on sanction lists as of its latest announcement, which makes ports more reluctant to work with them. The United States, Britain, Canada and Australia are also going after the vessels. The goal is to turn the ships into the pariahs of the sea.
But Russia continues to add vessels to take their place.
“You have this dreadful expression in America: Whac-A-Mole,” said David O’Sullivan, the E.U. sanctions envoy. “Circumvention is a bit like that.”
Still, Russia must pay for the new ships.
“Everything we have done ends up costing them a lot more,” Mr. O’Sullivan said.
But it’s an imperfect solution. Shadow fleet ships have found ways around the blacklisting. They offload cargoes at sea, or they “flag hop,” changing their registrations to conceal their identities.
In the meantime, as Mr. Ralby warned, the West is prodding Russia to create a vast illegal economy.
But government officials argue that the alternative — doing nothing — is not a real choice.
Jeanna Smialek is the Brussels bureau chief for The Times.
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