Russia is spending around £2 billion building a “dark fleet” of tankers to evade sanctions and transport banned oil around the world, according to senior government officials.
The scale of the sanctions breach, which experts say could involve up to 1,800 ships with unclear ownership, has become clear on the second anniversary of Russia’s invasion of Ukraine, which triggered international restrictions on Russian trade.
But Western sanctions, including a $60 per barrel cap on Russian oil, have been criticized for being ineffective and failing to stem the flow of cash that fuels Russia’s war machine.
The price cap, well below the market rate of $80 per barrel, was designed to limit the Kremlin’s huge revenue from oil exports without causing further spikes in global energy costs. It is something. However, Russia is still exporting the same amount of oil as it was two years ago.
It avoided sanctions by creating a parallel transportation system that transports Russian crude oil through complicated routes.
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The Shadow Fleet is believed to have a large fleet of vessels over 15 years old, an age at which mainstream oil companies typically retire them due to wear and tear.
“Otherwise it would have been scrapped,” said Mike Salthouse of marine insurance company North Standard.
The size of this parallel fleet has “significantly increased”, added Olga Dimitrescu of the UK’s Office for Financial Sanctions Enforcement (OFSI).
“But it will come at a huge cost to Russia,” she estimated, adding that the cost amounted to around £2 billion. “This is $2.25 billion that the Putin regime spent on tankers, not tanks,” she added.
Experts say price caps are not working because they encourage black market trading in Russian oil.
Former spy Christopher Steele will consider secondary sanctions as countries including China and Turkey import cheap Russian oil, refine it and export it to the UK at “huge profits”. He said on ITV’s Peston program that he believes there is a need for it.
Labor MP and anti-corruption campaigner Dame Margaret Hodge has called for a tougher approach to sanctions following the suspicious death of Russian opposition leader Alexei Navalny in a Siberian prison.
In a letter to Foreign Secretary David Cameron, he pointed out that Britain’s maritime insurance industry had underwritten a third of all Russian oil shipped by sea between the start of sanctions and November 2023.
“Shockingly, some of this oil was being sold at prices above the price cap, in clear violation of sanctions,” she said.
Last week, Prime Minister David Cameron announced new sanctions targeting oil traders and energy projects.
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