Crude Tactics: The Shadow Fleet Reshaping Global Trade

CRITICAL CONTEXT: THE RISE OF SHADOW FLEET AND THE ECONOMICS OF EVASION

The Shadow fleet—also called the dark fleet—comprises vessels operating outside international norms to transport sanctioned cargo and illicit goods while evading detection and regulations. They serve as economic lifelines for states and actors facing international isolation.

Why Shadow Fleets Emerge (Economic Rationale) 

To grasp why shadow fleets exist, it's crucial first to understand the mechanics of economic sanctions. These instruments are employed by countries to deter or punish states, entities and individuals by restricting financial transactions or trade. Sanctions vary in complexity and scope:

• Primary Sanctions: Direct prohibitions within the sanctioning nation's jurisdiction (e.g., US bans Americans from doing business with Iran).

• Secondary Sanctions: Punishments imposed outside the sanctioning country’s borders, targeting foreign entities that do business with a sanctioned country (e.g., US threatens to cut off Chinese banks that work with Iran from accessing the US dollar system).

• Comprehensive Embargoes: Nearly complete trade bans, e.g., U.N. sanctions against North Korea.

• Targeted Sanctions: Restrict specific sectors, entities or individuals, e.g., US sanctions against Mexican cartel leaders.

With up to 90% of the world’s goods moved by sea annually, shipping is the key battleground of sanctions enforcement. Enforcement struggles in the maritime sector arise in particular because of:

• Jurisdictional Conflicts: Ships frequently have multinational ownership structures, insurance providers, and flag registrations, complicating enforcement efforts.

• Inspection Limitations: Port authorities lack resources and jurisdictional clarity to verify every vessel thoroughly.

• Complex Supply Chains: Deeply integrated global supply chains make it difficult to isolate sanctioned entities without heavily disrupting legitimate trade flows. 

Shadow fleets exploit these enforcement gaps, creating a web of economic incentives:

• Sanctioned Regimes: Establish or support these fleets as lifelines for their economies.

• Facilitators: Vessel owners, operators, and traders charge substantial premiums for handling sanctioned cargo due to the risk involved. 

• Discounted Goods: Buyers of sanctioned goods receive favourable terms and significant discounts.

Shadow tankers thus enable a mutually beneficial ecosystem where all participants—from government entities to private middlemen—extract economic value from sanctions evasion. 

MECHANICS OF EVASION: PRACTICAL STRATEGIES OF SHADOW TANKERS

Shadow fleets and their enablers systematically evade detection using a highly evolved playbook:

• AIS Manipulation & Spoofing: The International Maritime Organisation mandates AIS tracking for all vessels over 300 gross tonnes, but shadow fleet vessels disable or spoof these systems to mislead tracking efforts and operate invisibly.

• Ship-to-Ship Transfers (STS): Cargo exchanges on international waters allow vessels to obscure the origins of sanctioned goods, essentially "laundering" them through intermediaries in areas with limited monitoring like the South China Sea, Gulf of Oman, and eastern Mediterranean.

• Flags of Convenience and Flag-Hopping: Shadow tankers exploit lax registration requirements from countries like Panama, Liberia, and Gabon, or fraudulently claim foreign flags (as North Korea has done with Fijian and Cambodian registries) to disguise their operations.

• Vessel Identity Laundering: Ships manipulate their identities through falsified IMO numbers or by appropriating legitimate vessel identities, creating confusion in tracking systems and extending their operational lifespans even after being blacklisted.

• Shell Companies & Obfuscated Ownership: Strategic layering of corporate structures across opacity-friendly jurisdictions (e.g., UAE, Seychelles) deliberately obscures ultimate beneficial ownership while maintaining operational control and minimizing legal exposure.

• Alternative Financial Channels: Sanctioned entities bypass traditional banking through cryptocurrencies for anonymous transactions, ancient hawala networks based on trust rather than documentation, and state-sponsored SWIFT alternatives like Russia's SPFS and China's CIPS.

• Commodity-Based Exchanges: Direct bartering arrangements (e.g., oil-for-gold, oil-for-food) eliminate the need for financial transactions entirely, creating sanction-proof trade networks beyond Western financial oversight.

• Falsified Cargo & Documentation: Sophisticated document fraud across shipping papers, cargo manifests, and pricing attestations enables sanctioned goods to appear legitimate while passing through regulatory checkpoints with minimal scrutiny.

• No Insurance / Ghost Insurance: Many vessels operate without legitimate international insurance coverage, while others utilize pseudo-insurance firms (particularly from sanctioned states) that provide compliance paperwork without actual coverage, reducing costs while increasing environmental risks.

By leveraging these unlawful methods shadow tankers and parties doing business with them can effectively evade sanctions, reduce operational costs, and maximize their economic returns.

THE ORIGINAL PLAYERS

Shadow fleets have evolved out of necessity, becoming critical tools for states locked out of the global economy. Three nations have laid the blueprint:

IRAN — THE ARCHITECT

Iran pioneered shadow fleet operations, developing sophisticated methods to evade Western sanctions that have targeted the Iranian regime on and off since its founding:

• Longstanding Sanctions History: Iran has faced various sanctions since the theocratic republic came into existence in 1979, but the West significantly intensified pressure after 2010 in response to Iran's nuclear program and support for terrorist organizations.

• Coordinated Western Pressure: Coordinated sanctions from US and EU in 2010-2012 targeted their energy and financial sectors with oil embargoes, insurance ban and the disconnection of Iranian banks from the SWIFT network collectively slashing Iran's oil exports from 2.5 million to approximately 1 million barrels per day by late 2012.

• Post-JCPOA Adaptation: After the 2018 US withdrawal from the JCPOA ("Iran Nuclear Deal") and reimposition of "maximum pressure" sanctions, Iran's shadow fleet capabilities reached new sophistication, with hundreds of vessels estimated to be operating in this parallel maritime economy.

VENEZUELA — THE SURVIVOR 

Under Maduro's leadership, Venezuela developed shadow fleet operations as a survival mechanism against mounting international pressure:

• Critical Oil Sanctions: Though not the first faced by Maduro's regime, crippling sanctions arrived in January 2019 when the US sanctioned state oil company PDVSA, effectively blocking Venezuela's primary revenue source.

• Comprehensive Embargo: Further sanctions in August 2019 authorized secondary sanctions on entities dealing with the Venezuelan government, creating a near-comprehensive embargo.

• Economic Devastation: These measures devastated Venezuela's already collapsing economy, with oil production plummeting from 2.4 million barrels per day in 2015 to under 400,000 by 2020.

• Iranian Playbook Adoption: Venezuela adapted shadow fleet strategies from Iran, establishing trade networks with China and Iran to survive the economic isolation.

NORTH KOREA — THE GHOST OPERATOR 

North Korea developed perhaps the most elusive shadow fleet operations, enabling the isolated regime to maintain vital trade despite comprehensive international sanctions:

• Wholesale Sanctions: North Korea faced escalating UN sanctions from 2006-2017, culminating in UNSC Resolution 2397 which imposed comprehensive bans on key exports and limited oil imports to 500,000 barrels annually.

• Sophisticated Evasion Techniques: North Korea has responded by developing one of the most sophisticated maritime evasion techniques, utilising vessel identity laundering, flag-hopping, and falsification of documentation.

• Multi-Purpose Operations: Unlike other sanctioned states focused primarily on oil exports, North Korea's shadow fleet serves multiple strategic functions, facilitating imports of sanctioned petroleum products and exports of coal and arms.

Although Iran, Venezuela, and North Korea pioneered shadow trade tactics, Russia's invasion of Ukraine in 2022 transformed the scale and significance of these operations. As the most sanctioned

SCALING THE SHADOWS: A NEW ERA OF THE DARK FLEET

The invasion of Ukraine triggered a historic sanctions regime targeting the lifeblood of Russia’s economy: oil and gas exports. This prompted a vast expansion of the shadow fleet driven by Russia’s need to circumvent the West’s attempt to stifle their oil revenue. 

• Revenues at Risk: In 2022, oil and gas revenues accounted for approximately 42% of Russia’s federal budget ($170 billion of $407 billion total revenues). 

• Cutting Lifelines: Sanctions sought to sever Russia’s access to Western shipping, insurance, and financial networks—crippling its ability to export oil and fund the war effort (in 2022, Russia spent $86 billion on military spending). 

The Western Play: Oil Embargoes and The Price Cap ‘Compromise’

Western policymakers introduced a price cap system—an economic weapon designed to hit Russia's revenues without completely collapsing global energy markets. 

• Embargoes: In December 2022: The EU implemented a direct ban on seaborne imports of Russian crude oil which was followed by an expansion to include refined petroleum products like diesel and gasoline in February 2023. 

• $60 Crude Oil Cap: Concurrently, the G7, EU, and Australia banned any services supporting Russian oil sold above $60 per barrel (a heavy discount relative to market price at the time).

• Service Choke Point: The mechanism leveraged the West’s dominance over global maritime services—Western insurers, including P&I Clubs and Lloyd’s of London underwriters, control around 90–95% of large vessel coverage.

• Balancing Act: The goal was twofold: restrict the Kremlin’s cashflow while avoiding price shocks that would destabilize the global economy.

Russia’s Response: Assembling an Armada

Facing the threat of economic isolation, Russia’s energy sector players and their opaque intermediaries launched a rapid and aggressive buildup of maritime capacity to circumvent Western control. 

• Ageing Tanker Acquisitions: Russian-linked entities moved quickly to purchase ageing vessels—many over 15–20 years old—which could carry Russian oil covertly and sell it above the price cap.

• Loophole Profiteering: Despite sanctions, European companies have earned an estimated $10 billion selling ships into the shadow fleet — Greek firms alone sold 127 tankers as prices for old vessels spiked.

• Flags of Convenience: These vessels were quickly re-registered under lenient and unsanctioned jurisdictions such as Panama, Liberia, Gabon, and Cameroon, offering minimal oversight and regulatory scrutiny.

• Expansion at Scale: By October 2023, the shadow fleet used by Russia had grown to approximately 600 tankers, many deemed past their prime by commercial standards.

• Continued Growth: In 2025, Ukrainian intelligence estimated the network had expanded to around 1,000 vessels with a combined deadweight exceeding 100 million tons. 

• Surveillance and Sabotage: In addition to transporting oil, vessels in Russia's shadow fleet have been implicated in intelligence gathering and infrastructure sabotage, notably in the Baltic Sea where shadow vessels have been linked to subsea cable cutting incidents, as detailed in our piece: Subsea Secrets: Spies, Sabotage, and the Global Race for Internet Cables .

Rewiring Global Trade: How Russia’s Shadow Fleet Redrew the Energy Map

The rapid expansion of Russia’s shadow fleet didn’t just evade sanctions—it restructured global oil trade patterns entirely.

• European Decoupling: Before the invasion, EU members imported 2.2 million barrels per day (bpd) of Russian crude; by 2024, this collapsed to near zero as the embargo took effect. 

• Asian Surge: Indian imports skyrocketed from 100,000 bpd pre-invasion of Ukraine to over 1.8 million bpd in 2024, while China consolidated its position as Russia’s largest buyer. Together, China and India now absorb almost 90% of Russia’s seaborne crude exports .

• Shadow or Alternative Market?: China and India have not recognized Western sanctions, enabling above-cap purchases when prices were high. Russia's shadow fleet operates alongside Asian carriers using non-Western insurance and services—both circumventing regulations that would otherwise block these transactions.

• Shadow Fleet Dominance: According to Kyiv School of Economics estimates, Russia's shadow fleet transported 4.1 million barrels daily by June 2024—representing 70% of Russia's seaborne exports, including 89% of crude oil shipments—demonstrating the scale to which sanctions evasion had become the norm rather than the exception.

• India’s Refining Boom: India capitalized on discounted Russian crude to expand its refining industry—reselling processed fuels like diesel and gasoline globally, including to Europe.

• Shadow Routes and Longer Voyages: New direct maritime routes from Russian Baltic ports to India—previously rare—became standard, increasing voyage times, insurance risks, and transport costs by an estimated $10–15 per barrel.

The Shadow Fleet vs. The West: Who Won?

Although it is hard to definitively quantify the efficacy of Russia's strategy in response to unprecedented Western sanctions, the shadow fleet undoubtedly delivered a major strategic win for Russia in the short term.

• Initial Revenue Fall (2023): After surging to ~11.6 trillion rubles in 2022 from high prices and early war effects, Russian oil-related tax revenue collapsed to 7.04 trillion rubles in 2023, driven by sanctions and the price cap.

• Oil Revenue Surge (2024): In 2024, oil-related tax revenue rebounded nearly 30% to 9.19 trillion rubles (~$89.4 billion), with total oil and petroleum export earnings reaching $192 billion despite ongoing sanctions.

• Shadow Fleet’s Role: Russia’s shadow fleet transported around 90% of its seaborne crude, enabling widespread price cap evasion and adding at least $8 billion in extra revenue.

• Sanctions Enforcement Failures: A lack of centralized enforcement, jurisdictional fragmentation in the EU, and limited maritime monitoring allowed the shadow fleet to operate largely unchecked.

• Global Energy Impact: By maintaining supply to Asian markets, Russia helped prevent the kind of oil price spikes that Western economies had feared—inadvertently aligning with the West's energy stability goals while simultaneously undermining their economic sanctions.

The shadow fleet’s success exposed critical flaws in Western sanctions strategy—specifically, the difficulty of enforcing compliance at sea, the ease of creating opaque financial networks, and the vulnerability of global maritime infrastructure to legal grey zones.

2025: A Crackdown on the Shadow Fleet — and an Uncertain Future

After two years of underwhelming enforcement, the West finally shifted strategy. In early 2025, the Biden administration took direct action by imposing sweeping sanctions on hundreds of vessels in the shadow fleet.

• Mass Blacklisting: In January 2025, the US sanctioned multiple Russian oil companies and 183 tankers linked to Russian interests, covering roughly 10% of Russia’s seaborne oil capacity and nearly 20% of its entire shadow fleet.

• Threatening the Enablers: These sanctions also went after the intermediaries, traders and ports that were facilitating the illicit trade of Russian oil.

• Deflagging: Amidst pressure from the US, Panama revoked 128 ship registrations in an effort to crackdown on shadow tankers using unsanctioned flags

• Disruption: For the first time, sanctions appear to have teeth as India announced a ban on accepting sanctioned vessels after March 2025.

• Market Shock: Russian seaborne oil exports fell by an estimated 0.5–1 million barrels per day, while discounts on Russian Urals crude widened sharply leading to a dip in price below the $60 cap.

The US has demonstrated that when going after the fleet and those who are facilitating the trade of sanctioned Russian oil, it is possible to significantly disrupt Russia's sanctions evasion capabilities.

What Next? How Trump-Putin Dynamics Could Reshape the Shadow Fleet's Future

With Donald Trump's return to the White House, the unpredictable Trump-Putin relationship introduces new uncertainty for sanctions policy and the shadow fleet. Whether Trump chooses to ease sanctions as part of a deal with Russia or escalate pressure to demonstrate strength, both scenarios could spell an end to the shadow fleet as we know it. Here's why and the potential downstream effects:

• Doubling down: If Trump elects to expand sanctions targeting shadow tankers, these vessels could quickly find themselves without willing ports or traders, effectively forcing them deeper into the margins of global shipping.

• Potential Price Spike: Risk aversion chokes Russian oil flows; unless other producers fill the gap fast, prices spike sharply.

• No Return to the Mainstream: Conversely, if sanctions are lifted, much of the shadow fleet—old, non-compliant, and poorly maintained—would struggle to rejoin mainstream commercial markets.

• Prices Tumble: Sanction relief restores visibility and lowers friction in oil flows, deflating geopolitical risk premiums and softening global benchmarks.

• Scrapyard Surge: Either outcome could lead to hundreds of obsolete vessels  demolition simultaneously, inundating scrap yards that saw record low activity throughout 2023-2024. 

• Order Book Highs: The global tanker fleet orderbook—the pipeline of new ships on order but not yet delivered—has rebounded sharply from historic lows, rising from under 5% to around 15–16% of the existing fleet.

• Market Recalibration: The combination of shadow fleet obsolescence and high order book volumes could create significant market disruption—potentially leading to overcapacity, freight rate volatility, and a rapid shift in the age and quality profile of the global tanker fleet.