Russian ‘shadow fleet’ of ramshackle oil tankers threaten Europe with environmental disaster
Worn-out, uninsured tankers full of Russian oil sail through the North Sea several times a day. With these boats, Russia is evading sanctions, funding the war in Ukraine and threatening maritime safety.
This article in 1 minute
What is the news?
- Hundreds of creaking oil tankers sail close to the coasts of European countries every day.
- The tankers belong to the so-called Russian shadow fleet, which carries Russian oil in violation of sanctions. The Kremlin needs these oil revenues to wage war in Ukraine.
- Since the start of last year, hundreds of these tankers have passed near countries including Estonia, Latvia, Lithuania, Finland, Sweden, Poland, Germany, Denmark, the Netherlands, Belgium, the United Kingdom, France, Portugal and Spain.
Why is this important?
- There is a high risk of collisions, explosions and other accidents. Experts say it is a matter of time before a major environmental disaster occurs.
- These tankers are uninsured or poorly insured, leaving European countries to foot the bill if things go wrong.
How was this researched?
- Follow the Money obtained a list of all tankers transporting Russian oil without adequate insurance from the Kyiv School of Economics Institute.
- Public information on shipping routes, collated by Global Fishing Watch, was used to determine which tankers passed through the North Sea and how often they did so.
- Through the Electronic Quality Shipping Information System (Equasis), FTM was able to find out how often the tankers were inspected, what defects were found, who the nominal owners are and whether they are insured with Western parties.
This article is part of an ongoing series.
The Russia FilesAt the start of last month, a rusty tanker named the Reus was loaded with 700,000 barrels of oil at the Russian port of Primorsk on the Baltic Sea. It passed by Estonia, sailed around the Swedish island of Gotland and then Denmark, before skirting the Dutch coast and travelling on with its cargo to India.
Since 1 January 2023, the Reus – or the Mira, as the ship was previously called – appeared fourteen times off the coast of Northwestern Europe, according to data from Global Fishing Watch.
But the red, almost 250-metre-long tanker should not have been on its way to a refinery in India but to the scrapyard to be decommissioned.
At 21 years old, the ship is approaching its sell-by date, with oil spills increasingly likely due to wear and tear, outdated equipment and mechanical problems. After 22 years, an oil tanker normally ends up on the scrap heap.
The Reus, along with hundreds of other ageing oil tankers that continue to sail, are ticking time bombs that endanger maritime safety and could potentially lead to major environmental disasters, experts say. Europe has already come close to catastrophe several times.
The oil tankers are part of the so-called Russian shadow fleet deployed to circumvent Western sanctions. The main aim is to sell Russian oil for more than 60 dollars a barrel, a price ceiling set by the G7 and European Union. With these proceeds from the oil trade, the Kremlin is funding the war in Ukraine.
Since the start of last year, Russian tankers have sailed through the Baltic Sea, past Northwestern Europe and along the coasts of the UK, France and Portugal almost 1,300 times. Almost all of those boats are heading into the Mediterranean on their way to Asia. That's an average of two to three such journeys a day. Some passed only once, others much more often. In total, FTM identified 410 different oil tankers carrying Russian oil along this route.
These tankers pass perilously close to European countries, sailing both through territorial waters and through what are known as Exclusive Economic Zones – international waters where nearby states have certain rights.
Close calls
These Russian oil tankers also carry out risky operations, for example ship-to-ship transfers whereby oil is pumped from one tanker to another while at sea. This method of transfer, which often takes place in the Mediterranean, conceals the fact that the oil comes from Russia. In late September, such a ship-to-ship transfer went wrong off the coast of Kuwait and more than five thousand barrels of oil flowed into the sea.
Strong controls on the seaworthiness of these oil tankers are lacking. Occasional inspections in ports, usually in Russia, China or India, find many defects in these tankers. They fly the flags of countries in Africa or island states that do not closely adhere to international regulations, known in the maritime industry as flags of convenience.
Until last August, the Reus flew the flag of Vietnam, a country with a notoriously lax approach to vessel safety. The tanker currently flies the flag of Sierra Leone, a relative newcomer as a ‘flag of convenience’ that is increasingly popular within the shadow fleet.
“Large accidents are just a question of time, we have been lucky so far,” said Benjamin Hilgenstock, economist at the Kyiv School of Economics (KSE) Institute. Hilgenstock and his team have been investigating Russia's evasion of sanctions since the start of the war in Ukraine.
One close call happened this spring, when the Andromeda Star, part of the shadow fleet, collided with a freighter near Denmark.
A year earlier, the engine of another shadow fleet tanker called Canis Power failed, leaving the boat adrift in Danish waters for six hours. Days after both these events the ships were already sailing elsewhere in Europe and continuing their illicit trade.
Insurance company Allianz calculated that globally there have already been at least fifty incidents involving old shadowfleet tankers, from fires to oil spills.
Sometimes even with fatal consequences, as in May last year on the oil tanker Pablo. Explosions in the hold caused a huge fire that destroyed almost the entire deck. Three crew members were reported missing and never recovered.
The accident occurred in the Strait of Malacca, a busy shipping lane near Singapore. A bigger disaster was avoided because the Pablo was not fully loaded with oil at the time.
If a major disaster were to occur, the clean-up costs would fall on the country in whose waters the accident happens, because all these ships are uninsured or poorly insured.
European governments have few options and very limited resources to reduce accident risks in the North Sea or in other European waters. The tankers have the right of free passage through international waters and avoid port visits in Europe, thus staying out of reach of national authorities.
“The West had leverage over Russia through the fact that it either owned or insured most of the tankers Russia was using”
“[European authorities] say vessels are not allowed to cross the Baltic Sea without proper insurance, but no one has figured out the enforcement,” said Hilgenstock of the KSE Institute.
This is also the view of German political scientist Jan Stockbruegger of the University of Copenhagen, who specialises in maritime security policy.
He said: “In the last fifteen to twenty years the maritime safety regime has improved quite a bit but we are now moving back in time when it comes to maritime safety. Many of these shadow tankers would not have operated in European waters the last five, ten years, fifteen years even. But they're now coming back and that's a big concern."
Russia circumvents the price cap
The presence of the Reus and hundreds of other old tankers in European waters is the direct result of sanctions imposed by Western countries because of the war in Ukraine.
The European Union, together with the United States and other G7 partners, introduced a price cap in late 2022: Russian oil has since been allowed to be sold only for less than 60 dollars a barrel. The money flow to the Kremlin is thus slightly reduced.
It was a conscious political decision not to stop that flow entirely. A full embargo on Russian oil would drive up the price on the world market, resulting in higher costs at the pump and possibly even an economic recession. That, especially for Americans, is too high a price.
The G7 wants to enforce the price cap by banning Western parties - from oil traders to insurers - from engaging in shipping Russian oil at prices above the 60 dollar limit.
“The West had leverage over Russia through the fact that it either owned most of the tankers Russia was using or insured them with a form of insurance, which is very hard to replicate,” said Craig Kennedy, a historian of the Russian oil industry at Harvard.
But the plan failed. Russia could easily circumvent the price cap.
“Russia quickly realised that it would need to build up its own fleet by buying mainstream tankers,” said Kennedy. Largely from Western owners, a lot of Greek owners. By the time a tanker gets to be fifteen or so, the owners of those tankers are ready to sell those. The first thing that happens is they drop their Western insurance.”
For the often Western owners of the old oil tankers, selling them was attractive, as they pocketed 20 or 30 million dollars for a ship that would otherwise have ended up on the scrap heap in a few years.
“Russia sent a bunch of agents out and they spent literally billions of dollars buying up a few hundred old vessels with a lot of financing from Russian banks.” These banks in turn received advantageous loans from the Russian state, said Kennedy, who was an investment banker in Russia for 25 years.
According to his calculations, Russian representatives have spent a total of nearly 10 billion dollars on old oil tankers.
The identities of these representatives, and the identities of the sellers, is unknown. What is clear, however, is that Russia has managed to maintain its oil export revenues with the shadow fleet. In July 2023, the average price of a barrel of Urals oil broke through the price cap of 60 dollars a barrel.
Worthless insurance
Because Russian ships want to stay under the radar of Western authorities, they are either poorly or uninsured, and remain out of reach of international agreements built up over decades to ensure safety at sea.
In major oil spills, the cost of salvaging tankers and cleaning up pollution can run into the billions of dollars. Ship owners cannot use ordinary insurance companies to cover this, as the financial risks are too great.
That is why there are so-called P&I (protection and indemnity) Clubs, associations of ship owners who put money into a fund to pay claims following accidents and environmental disasters.
Before the sanctions against Russia, 95 per cent of all oil tankers were insured through one of the 12 Western P&I Clubs affiliated to the International Group of P&I Clubs. If the damage resulting from an accident exceeds 10 million dollars, this group pays out.
Members of a rescue team searching for the missing crew after the tanker Pablo caught fire off the southern coast of Malaysia.
© ANP
“Back in 2022, Russia relied pretty much a hundred percent on either Western-owned tankers or Western insured tankers,” Kennedy said. “Even their own national oil tanker company SovComflot, all their ships were insured by London-based [P&I Club].”
But these P&I clubs violate Western sanctions when they insure tankers carrying Russian oil at more than 60 dollars a barrel. So the first thing that happens when a ship joins the shadow fleet is that the new owner cancels this insurance.
Sometimes a ship now has Russian insurance. The Andromeda Star, which collided with a freighter in Danish waters this spring, had such insurance. But that insurance – as an investigation by the Financial Times and Danish investigative journalists from DanWatch discovered – turned out to contain a “sanctions clause”.
This means nothing is paid out if the ship carries oil above the price ceiling set by the G7. Since the shadow fleet is doing exactly that – carrying oil above the price ceiling – the ship is therefore uninsured.
Tropical smokescreen
Without adequate insurance, the owner or manager of a tanker is liable, but it is often unclear who this is.
The owners of sanctions-avoiding oil tankers are – on paper at least – in far flung locations.
According to the Electronic Quality Shipping Information System (Equasis), the Reus was, until last August, owned by a company called Sao Viet Petrol Transportation based in Vietnam.
Since then, the boat has been owned by a company called S&F Marine Limited, based in the Seychelles.
S&F Marine Limited is based at the same address and in the same suite as a financial services firm called AC Management. The owners of 31 other tankers in the shadow fleet, all under different company names, are also registered at this address. The Seychelles, a tax haven archipelago in the Indian Ocean, does not disclose who the individuals behind all these companies are.
Data collected by FTM shows that of the ten tankers aged twenty years or older that most frequently passed through the North Sea, including the Reus, seven are owned by companies in Seychelles, five of them registered to the above address The other three are in Vietnam, Azerbaijan and Moldova.
A total of 94 of the owners or managers of the old tankers sailing through the North Sea are in the Seychelles. Others are in the United Arab Emirates (177) or Russia (125).
Attempts to sanction these companies come to nothing. The ships then simply move to another company, sometimes in another country, sometimes just under a different name at the same address.
Neither Sao Viet Petrol Transportation nor AC Management responded to Follow the Money’s requests for comment.
Shipping scrap heaps
The poor condition of the shadow-fleet tankers has been recorded during their rare inspections in ports.
The Reus was last inspected on 7 March 2024 during a visit to the Chinese port of Dongying. Five deficiencies were found, including problems relating to fire safety and power supply, but the boat was allowed to keep sailing.
The list of defects was much longer when checked at the Latvian port of Ventspils in August 2023. The ship did not meet the minimum safety standard in twelve areas, and the rotten state of the stairs prompted port authorities to ban the ship from leaving the port until this problem was resolved. The vessel was in detention for three days.
“When you get on the bridge, you see that the equipment is dated, or even broken”
Analysis of data on the ten tankers more than twenty years old that most frequently sailed through the North Sea shows how often deficiencies are found. Thirteen inspections found 83 deficiencies, data from the Electronic Quality Shipping Information System (Equasis) show. During this period, these ten ships passed through the North Sea 77 times.
It is not only the condition of the ship but also the quality of the crew that is important, said Georg Jaburg, the chairman of Pilotage Vlissingen, which helps vessels steer through the Western Scheldt estuary towards the port of Antwerp.
“You usually see it immediately when you come on board. You step on an old pilot ladder [a rope ladder used on cargo vessels] and you often see that the people in the crew are inexperienced. Communication is difficult because they speak little or no English. Then when you get on the bridge, you see that the equipment is dated, or even broken.”
Elusive
In an attempt to tackle the shadow fleet, 27 ships, including 18 oil tankers, were placed on the European sanctions list at the end of June.
These ships are not welcome in European ports and European companies are prohibited from providing them with crew, supplies or financial services such as insurance.
The measures seem to have been only partially effective. According to marine and energy researchers at the cargo tracking platform Vortexa, 30 percent of the sanctioned vessels stopped transporting Russian oil.
But on six occasions, one of these sanctioned tankers was still able to sail unhindered along the North Sea. The oil tanker Kavya even entered Dutch, Danish and British territorial waters on 27 August, according to data from Global Fishing Watch.
Shadow fleet vessels do not dock at European ports, where inspections could be carried out, tracking data shows.
In the Dutch part of the North Sea, it is up to the coast guard to supervise passing boats, but it only intervenes if there is an incident or accident, the ministry of infrastructure and water management said.
Preventive action is also lacking in other countries. Last July, European leaders met in the UK and promised to do more to address the shadow fleet, implicitly acknowledging not enough has been done to counter the risks. “It is critical to ensure full compliance of all safety, liability, and environmental rules across the maritime economy,” they said in a statement.
But despite this call to action not much has changed. Until European or national authorities find a way to crack down on the Russian shadow fleet, the risk of a serious accident remains high.
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Jesse Pinster
Investigates climate and energy policy, anti-democratic forces within the EU and wishful thinking by European institutes.
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