Russias Shadow Fleet Drives Lucrative Trade in Ageing Tankers as Prices Soar 60%

Moscow’s ability to maintain its oil trade and finance its Ukrainian war efforts, despite international sanctions, hinges on a fleet of over 600 elderly and poorly maintained vessels. This ‘shadow fleet’ operates without adequate insurance, creating a surge in demand for ageing second-hand tankers whilst bringing vessel scrapping to a near standstill.

The market impact has been substantial, with Drewry’s estimates showing the average price of a 15-year-old crude tanker rising from £25.6 million pre-war to £42.5 million by December 2023. This remarkable 60% increase occurs despite major oil companies typically avoiding tankers exceeding 15 years of age.

European and US shipping companies previously owned more than one-third of these shadow fleet tankers, generating sales exceeding £4.7 billion. The surge in demand has created a profitable opportunity for vessel owners, including British companies, though questions arise about the adequacy of UK and European regulations governing ship sales.

British firm Union Maritime exemplifies this trend, having sold eight ageing vessels that subsequently joined the shadow fleet. These ships transported approximately 40 million barrels of Russian oil post-sale, contributing to Union Maritime’s exceptional profit growth – reaching £414 million over two years.

The shadow fleet’s emergence has sparked environmental concerns, as these vessels typically lack comprehensive liability insurance. While standard maritime transport relies on International Group insurance coverage, shadow fleet vessels operate without such protection, raising significant risks of environmental damage.

The UK government introduced guidance on oil tanker sales to third countries in May 2023, recommending enhanced due diligence for vessels over 15 years old. However, Labour MP Phil Brickell has called for investigations into regulatory effectiveness, highlighting the need for stronger oversight in preventing British-sold vessels from entering Russia’s shadow fleet.