[The Two Faces of the Shadow Fleet]③The West Moves to Block the Supply of Illegal Aging Vessels... "International Cooperation Needed"

Old Oil Tankers Converted into Shadow Fleet
A Growing Threat to Global Maritime Safety and the Main Cause of Environmental Pollution

Editor's NoteThe Strait of Hormuz in Iran, which accounts for about 34% of global maritime crude oil trade volume, has seen tanker traffic plummet to just 10% of normal levels after it was blocked. This is the result of the Iran war, which U.S. President Donald Trump promised would end in no more than six weeks, now entering its sixth month. Although some had predicted at the start of the war that oil prices would soar to 200 dollars per barrel, prices have fluctuated between 70 and 120 dollars since the outbreak of hostilities. A key factor limiting oil price increases has been the activities of the so-called "Shadow Fleet." These are groups of crude oil smuggling vessels with unclear national affiliations, often referred to as "pirates." Experts say the Shadow Fleet temporarily acts as a firebreak, preventing oil prices from skyrocketing in the short term, but is likely to have negative long-term effects. Observers point out that it undermines the effectiveness of U.S. sanctions against Iran and finances the Iranian regime, playing a central role in prolonging the conflict. This is why, when the U.S. announced sweeping economic sanctions against Iran last month, it specifically named the Shadow Fleet as a target. The Asia Business Daily has examined the realities of the Shadow Fleet and possible ways to enhance the effectiveness of U.S. sanctions.

The Caroline Bezengi, a Cameron-flagged oil tanker that mysteriously sank in the Oman waters last June. It is suspected to be an oil tanker belonging to the Russian shadow fleet. Source: Ambray website, a UK maritime security company

Salvage operations for the Caroline Bezengi, which ran aground in the Oman waters, began on the 13th of last month. This comes about two months after the grounding. During this time, oil leaked from the vessel created an oil slick spanning 2,000 square kilometers in nearby waters. The tanker is registered under the Cameroonian flag, with its owner listed as a shipping company based in Shanghai, China. However, it has been confirmed as a Shadow Fleet vessel that departed from mainland Russia earlier this year.

The vessel in question is 25 years old, having been built in 2001. There are concerns that aging ships, which should be scrapped, are being deployed into the Shadow Fleet, increasing not only economic costs but also environmental and safety risks. Calls are growing to tighten monitoring of aging tanker operations as well as their insurance and safety status.

Russia expands its Shadow Fleet by converting outdated oil tankers... Nearly 25-fold increase in two years

Russia, which faces Western economic sanctions due to the war in Ukraine, is actively utilizing aging oil tankers as part of its Shadow Fleet. Since Russia invaded Ukraine, demand for Russian crude oil has underpinned the second-hand trade of older tankers. Recently, methods of hiding the real owners and purposes of these vessels have also proliferated, including changing a ship’s flag or using paper companies set up in third countries.

According to global shipping brokerage firm BRS Shipbrokers, about 78% of second-hand tanker transactions between January and October of last year involved ships at least 15 years old. Among the 262 tankers aged 15 years or older that were traded during the same period, about 130 were subject to sanctions. Buyers were from various countries including China, Greece, and the United Arab Emirates (UAE), with Chinese shipowners purchasing about 26% of all used vessels.

The number of Russian Shadow Fleet ships designated for EU sanctions is also increasing rapidly. As of the 23rd of last month, the European Commission had designated 673 Russian Shadow Fleet vessels as sanction targets—a nearly 25-fold increase compared to 27 ships on June 27, 2024.

In April, the EU slightly amended its sanctions policy through the 20th package against Russia, allowing exceptions for sanctioned vessels if the transaction is for scrapping or recycling purposes. This carve-out was designed to offer a legitimate means for aging, sanctioned vessels to exit the market through scrapping or recycling instead of continuing to operate in the shadow market. Dimitris Roumeliotis, a researcher at Exclusive Shipbrokers, told S&P Global, "The scrapping clause is a constructive addition," noting that the provision creates a legal pathway for vessels to leave the Shadow Fleet by being recycled.

The reason for blocking aging Shadow Fleet vessels is that their sinking or breaking apart can cause catastrophic oil spills. According to the Center for Research on Energy and Clean Air (CREA), the combination of aging, poor maintenance, and insufficient Protection & Indemnity (P&I) insurance increases environmental and financial risks from Shadow Fleet operations. If an oil spill occurs from a tanker that has ambiguity in its insurance coverage, response and compensation costs could exceed 1 billion euros (about 1.6158 trillion won), ultimately being passed on to taxpayers in coastal nations.

Michelle Wiese Bockmann, Principal Maritime Analyst at Windward, also told The Wall Street Journal (WSJ), "Many Shadow Fleet vessels are little more than rusty scrap metal drifting on the ocean,” adding, "Even if a vessel is insured, if it operates under a false flag, the insurance coverage could be voided."

Despite sanctions, Shadow Fleet continues to grow...Limiting areas of operation is needed

Some experts argue that in order to eradicate the Shadow Fleet, it is necessary not only to block the supply of ships via sanctions, but also to cut off the operating foundation of the Shadow Fleet itself. Since the number of vessels keeps increasing despite stronger sanctions, the actual areas in which they can operate need to be reduced.

In April, the International Maritime Organization (IMO) introduced guidelines to strengthen due diligence and information verification for vessel registration, aiming to prevent fraudulent registrations and misuse of national flags. There are calls not only to require submission of insurance certificates for each vessel, but also to check whether the insurers exist and have genuine underwriting capacity. Enhanced verification like this is expected to constrain the Shadow Fleet’s operational area, as vessels using fake documents will find it more difficult to access ports or continue operations.

However, for such measures to be truly effective, more extensive international cooperation is needed—beyond just U.S. and EU sanctions. If countries outside the West continue registering Shadow Fleet vessels or providing related services such as port access and insurance, there remains room for circumvention. Experts explain that only if the international community as a whole shares vessel registration, ownership, and insurance information—and applies similar verification standards—will individual countries’ crackdown efforts translate into real world results.

The Atlantic Council, a U.S. think tank, noted that sanctions against individual ships alone are unlikely to significantly reduce Shadow Fleet activity. Even if some ships stop operating due to sanctions, new aging vessels may continue to enter the Shadow Fleet. Thus, the Council recommends establishing a "monitoring hub" to specialize in identifying and tracking relevant ships and companies, and strengthening regular inspections of suspicious vessels. It also points out the need to pressure countries that register Shadow Fleet vessels to restrict new registrations or cancel existing ones.

This content was produced with the assistance of AI translation services.