Shadow Fleet Impunity in the Baltic

Russia's shadow fleet of oil tankers continues to operate at full throttle in the Baltic

The UK and the EU have sanctioned a huge number of shadow fleet ships this year. The UK sanctioned another 70 ships last month, bringing the total number of vessels it sanctions to 493. The EU isn’t far behind. It sanctions 444 vessels. Both numbers are far above the 216 ships sanctioned by the US and certainly speak to a growing desire in Europe to shut down the shadow fleet.

The problem is that the shadow fleet continues to operate with impunity in the Baltic despite the European sanctions wave. If Europe really wants to disable Putin’s shadow fleet, two things must happen: (i) the sale of Western-owned oil tankers to the shadow fleet, especially by Greece’s shipping oligarchs, must be stopped once and for all; and (ii) Europe must do whatever it takes to get the US to join in recent sanctions efforts.

Both points are critical. First, if Russia can keep buying oil tankers from Western ship owners with little difficulty, sanctions will constantly be playing catch-up, because new shadow fleet ships will be popping up all the time. Prohibiting sale of Western-owned oil tankers to Russian-controlled front companies, if properly enforced, would be a huge blow to Putin. The shadow fleet consists of old vessels that have only short service lives left. The shadow fleet would shrink of its own accord with such a ban. Second, US sanctions pack a far greater punch than European ones, as Ben Harris and I documented in a recent Brookings essay. That’s because the US aggressively applies secondary sanctions, which means foreign businesses - like Indian port operators for example - refuse to do business with US-sanctioned ships for fear of being frozen out of US payments networks. Of course, in the medium-term the solution to this is for the EU and UK to also aggressively wield secondary sanctions. But - in the short term - the only fix is to get the US to join in European sanctions efforts. Europe must do whatever it takes to make this happen. If that means secondary tariffs on India and China, so be it. Europe should signal willingness to impose such tariffs if the US sanctions all the ships now sanctioned by the EU and UK.

All this is so important because the shadow fleet continues to operate with complete impunity in the Baltic. The chart above shows seaborne export volumes out of Russia’s Baltic ports. Volumes are essentially unchanged this year, despite the massive wave of UK and EU sanctions. The gray bars in the chart are a rough proxy for shadow fleet activity. These are ships with unknown beneficial owner and without Western insurance. The EU and UK get points for sanctioning lots of shadow fleet ships this year. But what matters is to stop shadow fleet activity and here much more needs to be done. A wave of US sanctions would shut down much of the shadow fleet overnight. Getting the US to do this should be Europe’s top priority.