Effectiveness of Shadow Fleet Sanctions
US sanctions are massively effective, but joint EU and UK sanctions also pack a punch
Following Russia’s invasion of Ukraine in Feb. 2022, Western policy makers debated a full energy embargo as a way to punish Russia. Such an embargo had a big drawback, however, because the resulting supply shock risked spiking global oil prices. Instead, Western policy makers introduced the G7 price cap in Dec. 2022. The cap maintained the supply of Russian oil going to global energy markets, while limiting the amount of cash oil exports could generate for Putin and his war of aggression.
At the time of the invasion, Russia exported the bulk of its oil on Western-owned oil tankers, which was key to enforcing the G7 cap. In response, Russia built its shadow fleet of oil tankers - many hundreds of ships - allowing it to export oil outside the cap. Western sanctions on the shadow fleet have only reached critical mass recently and are likely to have a debilitating impact on Russia’s economy.
Today’s post examines the impact of US, EU and UK sanctions that were imposed earlier this year, most notably with the sanctioning of 75 shadow fleet ships by the US on January 10. The chart below calculates the percent change in oil tanker departures from Russian ports from February - May 2024 to February - May 2025, i.e. after a wave of sanctions earlier this year that saw the EU and UK follow the US. The basis for this chart is a database of 343 shadow fleet ships that I described in this week’s first post.
Activity in shadow fleet oil tankers sanctioned jointly by the US, EU and UK is down 90 percent, slightly ahead of US-only sanctioned ships (red), where activity falls 86 percent. The impact of US sanctions far exceeds that of EU- or UK-only sanctioned vessels, though ships sanctioned jointly by the EU and UK see activity fall 50 percent, which is still substantial. The very recent wave of sanctions by the UK and EU, which I wrote about here, will thus constrain shadow fleet activity substantially, above and beyond the toll already exacted by US, EU and UK sanctions imposed earlier this year.
The popular perception of Western sanctions on Russia is that they’ve been mostly ineffective. That perception is wrong. Sanctions on Putin’s shadow fleet reached critical mass only recently and - while international coordination of these sanctions needs to be improved - they’re likely an existential threat to Russia’s shadow fleet.