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Aug 28, 2025
FUEL FOR THOUGHT: Shadow tanker operators swing between sanctioned countries to support oil flows
Crude Oil, Maritime & Shipping, Refined Products, Wet Freight August 28, 2025 FUEL FOR THOUGHT: Shadow tanker operators swing between sanctioned countries to support oil flows By Max Lin Getting your Trinity Audio player ready... HIGHLIGHTS Growing pool of tankers serving West’s geopolitical rivals Profit-chasing magnates operate ‘state-tolerated’ flexible fleet Old, uninsured tankers threaten marine environments Russia, Iran and Venezuela -- all under various US and EU sanctions targeting their energy exports -- are increasingly sharing the same pool of vessels to maintain their overseas oil sales, aided by an emerging class of shipping companies controlled by shadowy businessmen, some of them with strong ties to the West. The number of tankers transporting crude and refined products produced by more than one of the sanctioned countries has reached 193, representing a growth of more than fivefold from 35 at the end of last year, according to S&P Global Commodities at Sea and Maritime Intelligence Risk Suite data. Roughly 96% of the ships are operated by new, little-known companies registered in China, Hong Kong, the Seychelles, the UAE or other jurisdictions where legal challenges associated with Western sanctions are limited, the data suggests. While the three sanctioned countries are all OPEC+ members, share geopolitical interests with their worsening relationships with the West, and have publicly vowed to enhance energy links, observers suggest the entities that have emerged to ship their oil are mainly owned by businessmen who know state-owned oil producers in the countries well, rather than resulting from joint state efforts. "There's no formal, treaty-style 'tri-lateral logistics alliance,'" said Sanam Vakil, director for Middle East and North Africa at think tank Chatham House. "What you're seeing is ... best understood as opportunistic, state-tolerated logistics rather than a standing cartel." This group of ships sharing in the sanctioned oil trade has expanded at a faster pace than other shadow fleets established to bypass Western trade restrictions for just one of the countries. Based on the CAS and MIRS figures, the bespoke fleet for shipping Iranian oil has increased by 15 to 170 ships this year, but the Russian fleet has shrunk by 25 to 561 ships and the Venezuelan fleet decreased by 59 to 54 ships. Elisabeth Braw, a senior fellow with the Atlantic Council, suggested the development of the flexible fleet has come as shippers engaging in sanctioned trades sought to broaden their customer base in their relentless chase for profits. "People involved in the shadow fleet don't do it out of any sort of sense of patriotism toward Russia or any other country. It's a business opportunity," Braw said. "If you are involved in the shadow fleet, why not service every country that is interested in your services?" Emerging networks At least six tankers in the multi-country fleet are linked to Mohammad Hossein Shamkhani, identified by the US, UK and EU as the man behind a large logistics network transporting Russian and Iranian oil. Shamkhani, the son of Ali Shamkhani, a top adviser to Iran's Supreme Leader Ayatollah Ali Khamenei, has been shipping Iranian military equipment to Russia in exchange for oil while enabling Iranian petroleum sales with his family's influence, according to the governments. Operating an investment firm from London, the Iranian national was able to generate "tens of billions of dollars in profit" and own "exclusive properties around the world" via front companies and ship management firms, the US and UK have alleged. Western authorities have long targeted Russian, Iranian and Venezuelan state-owned oil and shipping companies in their sanction regimes, but the US in particular is starting to blacklist individuals they deem as involved in illicit trades. In recent months, the US Office of Foreign Assets Control has sanctioned Salim Ahmed Said after accusing the Iraqi-British national of selling Iranian oil disguised as Iraqi oil, British-French Mathieu Alain Michel Philippe for allegedly shipping Russian oil, and Greek shipbroker Antonios Margaritis for Iranian oil exports. "We call out the people who are involved in the shadow fleet," Braw said. "These are, in some cases, people who live in Western countries. The more we call out the actual individuals involved, the more it would disincentivize new players from joining the shadow fleet." Different operating patterns The expansion of the shadow fleet with flexibility in loading countries has been mainly driven by the additions of large tankers, with 50 VLCCs, 34 Suezmaxes and 67 Aframaxes/LR2s joining the armada, according to CAS and MIRS data. "It would make sense for Russian oil to be moved onto larger ships as soon as possible at sea," said Andrew Wilson, research head at BRS shipbrokers, explaining how the incremental ships could help sanctioned oil movements. "It would help to cut voyage distances and days." While each of the sanctioned countries have their bespoke fleets mainly lifting oil from their ports, the flexible fleet is often used to carry out offshore transfers in locations like Malaysia and Iraq or facilitate Venezuela's oil swap deals. These ships transported 2.24 million b/d of crude and petroleum products in the first half of 2025, of which slightly less than half were loaded directly from the sanctioned countries, the data showed. The KSE Institute, which has been tracking Russian oil flows since Russa's invasion of Ukraine in 2022, estimated 231 million barrels of crude were transferred from one ship to another in the East Outer Port Limits -- the Singapore Strait's eastern entrance -- during the first seven months of 2025. Benjamin Hilgenstock, head of macroeconomic research at the Kyiv-based academic institution, suggested those operations could often aim to disguise cargo origins of sanctioned oil while most importers are not interested in rigorous checks. "Many buyers, in practice, pay little attention to the origin as long as they receive the required volume and quality of oil," Hilgenstock said. "In some cases, buyers 'turn a blind eye' to the origin, especially if it allows them to obtain cheaper oil." Receiving end The CAS and MIRS data also shows the flexible fleet was mostly used to transport Iranian crude to China and Russian crude to India, meeting demand from the world's two largest seaborne crude importers. The oil is generally sold at discounts to non-sanctioned barrels from the Middle East and elsewhere, but the price differentials have been narrowing with the sanctioned countries able to use shadow fleet tankers to bypass trade restrictions. Platts assessed the discount of Russian flagship crude Urals to international benchmark Dated Brent on a delivered-at-place West Coast India basis at $2.60/b on Aug. 27, much lower than $19/b in January 2023. But the US has been sanctioning Chinese independent oil refineries and terminals for Iranian trades in recent months, while the EU targeted India-based Nayara Energy because of Russian state oil producer Rosneft's 49% stake in the refiner. Such actions would be more effective in curbing shadow fleet growth than blacklisting illicit shipping firms, which would simply prompt the sanctioned countries to find other players willing to ship their oil, according to Mark Montgomery, a senior fellow at Foundation for Defense of Democracies. "They'll move, move and move. What you have to do is to cut off the need," said Montgomery, a retired US Navy admiral, adding that oil buyers tend to be more exposed to international trades and US banking systems. Questions linger over how effective international sanction regimes can be amid varying geopolitical stances of Western countries. Since President Donald Trump's return to the White House in January, Washington has refrained from expanding its sanctions program against Moscow aside from doubling the tariffs on Indian imports to 50% for the country's Russian oil buying. But the EU and UK have continued to ramp up sanctions pressure on Russia, notably lowering the price cap for Russian crude to $47.60/b from early September. The US has kept the threshold at $60/b, below which the barrels can be sold and transported by companies without breaching sanctions in American laws. "Different countries impose different level of sanctions, meaning that there is not a level playing field, and some companies are free to engage in trade which is prohibited for others," said Daniel Martin, a partner of law firm HFW. "Building an international consensus is key, and any divergence between the core sanctioning authorities will make sanctions less effective." Business model Market participants said operating shadow fleet tankers could be highly lucrative, suggesting their owners are unlikely to withdraw from the restricted business unless legal pressure increases. The CAS and MIRS data reveal more than 96% of the multi-country fleet is aged 16 years or more, compared with the global average tanker age of 14 years, as the illicit players aim to acquire old ships at low prices while transporting sanctioned oil at high freight premiums. Xclusiv Shipbrokers recently estimated the secondhand price for a 15-year-old Suezmax at $40 million. The lumpsum Suezmax rate for shipping Russian crude from the Black Sea to India's western coast was assessed at $5.2 million on Aug. 27, according to Platts. With a roundtrip voyage time of roughly a month, a shadow shipowner could recover its investment and enjoy healthy profits in slightly over a year when trading on this route. But shipping industry officials have warned that these companies are essentially passing on external costs to others in the world. More than 93% of the flexible fleet is not known to have third-party liability coverage, meaning any pollution associated with them would need to be cleaned up by wider society. Many shadow ships turn off location transponders when carrying out STS transfers in busy trade lanes to hide their operations. "A pollution incident at sea [affects] the ocean, which circulates across the entire globe," said Larry Johnson, group head of marine business at Mercuria, one of the world's largest trading houses in non-sanctioned trades. "The rise of the shadow fleet really matters, because things that happen in the ocean affect everyone in the world. "The problem now is that the global commons are having to absorb that risk of an oil spill implicitly." Products & Solutions Crude Oil Gain a complete view of the crude oil market with leading benchmarks, analytics, and insights to empower your strategies. Learn More Editor: Gary Gentile
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