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Russia is said to have acquired more than a hundred end-of-life tankers that could be used to circumvent international sanctions on Russian black gold exports that came into effect on Monday. And this is just one aspect of the “shadow fleet” phenomenon, which has been gaining momentum in recent years.
It is called the “Shadow Fleet” or the “Ghost Fleet”. Behind this very promising term in the media, there is a phenomenon capable of undermining the architecture of international sanctions against Russian maritime oil exports that came into force on Monday, December 5.
“Russia has quietly built a fleet of around 100 aging tankers to deal with sanctions on its oil,” the Financial Times said on Friday, December 2. The Wall Street Journal added the following day that for some months, among certain small shipping companies -particularly in Asia-, there had been a race for second-hand oil tankers, especially those capable of navigating in “icy waters such as those found around Ports Russians facing the Baltic Sea’.
The objective would be to set up a parallel sector – the “shadow fleet” – to the traditional network of oil tankers to continue exporting Russian oil as if international sanctions did not exist.
These establish, from Monday, a ceiling of 60 dollars per barrel of oil above which Russia cannot export its precious hydrocarbon in the world (in addition to a total embargo on oil exports by sea to Europe). To ensure compliance with this rule, the United States and its allies prohibit marine insurance companies from insuring a cargo ship carrying black gold intended to be sold for more than the maximum price.
The vast majority of tankers should decide to do so since insurance is the key to doing business with the big oil companies, having accounts in the main international banks and benefiting from most of the services offered by the maritime groups of the main countries. Westerners, recalls the Wall Street Journal.
Except for the tankers of the “shadow fleet”. “These are old ships that in theory should be dismantled soon but are bought back to go back to sea without having taken out insurance with companies dependent on a G7 state, in order to continue trading with countries hit by international sanctions.” , explains Lawrence Haar, a specialist in energy economics at the University of Brighton.
These ships are not content to ignore an insurance policy recognized by the G7 States. “They can also turn off their transponder [qui transmet en temps réel leur position, NDLR] so as not to be seen at sea”, specifies Lawrence Haar. Hence the name “ghost fleet” retained by certain media.
The price of old tankers skyrockets
This phenomenon does not date from the war in Ukraine and the sanctions against Russia. It also worries Iranian oil, especially since former US President Donald Trump put sanctions against Iran’s energy sector back on the agenda in 2018. “This is also the case for Venezuelan oil,” adds Lawrence Haar.
It is difficult to estimate the magnitude of the phenomenon, but the American maritime business consultancy Capital Link judged, in November 2022, that only for the category of supertankers (just under 900 in operation), there were around 7.% that were part of this “shadow fleet”.
This phenomenon has only increased since 2019. “Major commercial shipping companies estimate that the number of ‘shadow’ supertankers has tripled during this period,” underlines the Financial Times.
And it would have flown away since the beginning of the war in Ukraine. Tanker trucks at the end of their useful life can sell for up to twice as much as a year ago. “This summer, a Greek owner was able to sell a 22-year-old icebreaking tanker for $32 million, while a similar ship sold for just $17 million last year,” the Wall Street Journal said.
Inflation that denotes the importance of demand. This would be proof that this “shadow fleet” is “becoming the main tool that the Kremlin is acquiring to aspire to circumvent international sanctions on oil exports,” estimates Francesco Sassi, a geopolitical specialist at the Institute for research RIE of Bologna, dedicated to the energy industry
It’s hard to say if that’s enough. It is true that between the hundreds of tankers that Moscow has acquired in recent months and the small companies willing to offer Russia the same services that they already provide to Iran or Venezuela, this “shadow fleet” may seem imposing. However, “this cannot be enough for Russia to be able to export as much oil as it did before the war,” says Francesco Sassi.
However, Moscow may not even need it right away. “The $60 cap shouldn’t hurt Russia’s export earnings, given that the price is close to the discount price Moscow is already charging to sell its oil to India or China,” Lawrence Harr said.
A “shadow fleet” as an insurance policy
This maximum price set by the United States in agreement with the major European countries had provoked the ire of some nations, such as Poland and the Baltics, which were campaigning for a much lower ceiling. For these countries, it was the only way to really hit Moscow in the wallet.
But Washington had ensured that this sanction was only a starting point. It would be quite possible to tighten this screw if necessary. Hence the interest, in the eyes of Moscow, for this “shadow fleet”, an asset that “Russia keeps in reserve in case Western countries decide to further lower the maximum price,” explains Lawrence Haar.
If these “ghost tankers” were to haunt the seas, it would not be good news for maritime trade, stresses Francesco Sassi. “The safety of navigation at sea could worsen as these ships are all at the end of their lives,” he concludes. With an increased risk of oil spills?
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