After Russia’s full-scale invasion of Ukraine, Western governments imposed sweeping sanctions aimed at choking off the Kremlin’s vital oil revenues. The EU and G7 implemented a $60-per-barrel price cap on Russian oil, restricted insurance and shipping services, and banned imports. Yet, despite these efforts, Russia has managed to maintain — and in some cases even increase — its oil exports. How? Through a complex network of offshore companies, murky financing, and a growing “shadow fleet” of aging oil tankers that operate in legal and geographic grey zones.
⚓ The Rise of the Shadow Fleet
This so-called “shadow fleet” consists of hundreds of oil tankers — many 15 to 20 years old — that have been bought by unknown entities, often registered in countries like Panama, the Marshall Islands, or the UAE. These ships are not covered by Western insurance providers and are usually operated by companies with no transparent ownership.
Tankers linked to Russia routinely conduct ship-to-ship (STS) transfers in international waters to obscure the origin of the crude. They may also “spoof” their AIS tracking systems, go dark mid-voyage, or mislabel the cargo as originating from Kazakhstan, Malaysia, or other neutral countries.
💰 Traders in the Shadows
Despite sanctions, global demand for Russian crude — especially from India, China, and Turkey — has created a booming parallel market. Oil traders and intermediaries, many now operating out of Dubai, Singapore, and Hong Kong, have stepped in to fill the gap left by Western companies.
These traders use offshore shell companies to purchase and resell oil, while relying on non-Western financial institutions to process transactions. Investigators have found links to small regional banks and maritime insurance providers that are willing to overlook the origins of the cargo — as long as the profit is high enough.
Some shipping executives report receiving unsolicited offers to sell old tankers at inflated prices, clearly intended for use in Russian trade. In several cases, the true buyer remained hidden behind layers of offshore ownership.
🔄 A Profitable Game
This system is profitable for everyone involved — except for the Western governments trying to enforce sanctions. Traders earn massive margins due to elevated risk premiums. Russia continues to receive hard currency to fund its military. And intermediary countries benefit from cheap crude and growing refinery businesses.
Estimates suggest Russia may be earning billions in undeclared revenues, undermining Western attempts to restrict its war chest. The shadow fleet now moves a substantial portion of Russia’s maritime oil exports.
🚨 The Risks Ahead
The longer this shadow system operates, the more entrenched it becomes. Western enforcement mechanisms have limited reach outside their jurisdictions, and there is little political will in places like the UAE or China to intervene. The risk is that the “shadow fleet model” becomes a blueprint — not just for Russia, but for other sanctioned regimes in the future.
What began as a workaround for oil sanctions could evolve into a new normal in global trade, where offshore finance, regulatory blind spots, and geopolitical fragmentation allow bad actors to profit from war.