Russia's 'Ghost Fleet': Navigating the Murky Waters of Sanctions and Oil Transport

In the wake of stringent Western sanctions aimed at curbing Russia's oil revenues, a clandestine network of aging tankers, dubbed the "ghost fleet," has emerged as a pivotal player in global oil transportation. This fleet operates under a veil of secrecy, employing tactics designed to circumvent international restrictions. While effective in sustaining Russia's oil exports, the ghost fleet introduces a host of challenges and risks to the global oil market.

The Genesis of the Ghost Fleet

Following Russia's invasion of Ukraine, the United States, European Union, and G7 nations imposed a price cap of $60 per barrel on Russian oil exports. This measure was intended to limit Russia's income while maintaining stability in global energy supplies. To enforce compliance, Western entities were prohibited from providing essential services—such as shipping, financing, and insurance—for oil sold above the capped price.

In response, Russia and its trading partners have assembled a fleet of older tankers, sometimes even purchased from European and U.S. shipowners. These vessels, many of which are nearing or have surpassed their typical operational lifespan, are registered under flags of convenience in countries with lenient regulatory oversight. This strategy allows them to operate with minimal transparency, effectively sidestepping the imposed sanctions.

Operational Tactics and Risks

The ghost fleet employs several methods to obscure its activities:

Flag Hopping: Frequently changing a vessel's registration to different countries to evade detection and complicate regulatory enforcement.

Disabling Tracking Systems: Turning off Automatic Identification Systems (AIS), which are mandated for safety and tracking, to conceal movements.

Ship-to-Ship Transfers: Conducting oil transfers between vessels on the high seas to mask the origin of the cargo.

These practices not only undermine international sanctions but also pose significant environmental and safety risks. The advanced age and questionable maintenance of these vessels increase the likelihood of mechanical failures, collisions, and oil spills. For instance, in May 2023, an 18-year-old tanker from this fleet suffered an engine failure in the Baltic Sea, highlighting the potential dangers associated with these operations.

How to insure a fleet that doesn’t exist

A critical aspect of maritime operations is insurance, which ensures that liabilities arising from accidents or environmental damages are covered. Traditionally, major Western insurers provided this coverage, enforcing stringent safety and maintenance standards. However, the sanctions have led to the withdrawal of these insurers from covering Russian oil shipments, creating a vacuum filled by less reputable entities.

A notable example is Ingosstrakh Insurance Company, a prominent Russian insurer. In January 2025, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned Ingosstrakh, alleging its involvement in insuring vessels within the ghost fleet. Ingosstrakh contends that it has proactively refused or canceled coverage for over 100 suspect vessels since 2022 and argues that it was sanctioned for insuring a ship before it joined the ghost fleet. The company warns that such sanctions undermine maritime safety by allowing "fly-by-night" insurers to dominate the market, entities that lack the capacity or intent to ensure compliance or pay claims, thereby elevating the risk of environmental disasters.

Global Implications

The proliferation of the ghost fleet has far-reaching consequences:

Environmental Hazards: The use of poorly maintained vessels increases the risk of oil spills, which can have devastating ecological impacts.

Market Distortions: By circumventing sanctions, the ghost fleet helps maintain Russian oil flows, affecting global oil prices and market dynamics.

Regulatory Challenges: The opaque operations of the ghost fleet complicate enforcement efforts by international regulatory bodies, undermining the efficacy of sanctions.

Policy Responses and Future Outlook

In recognition of these challenges, European nations have agreed to tighten restrictions on the ghost fleet. Measures include requiring vessels to provide proof of adequate insurance while transiting European waters, such as the Danish Straits and the Gulf of Finland. Ships failing to comply may face sanctions or be denied passage, aiming to mitigate the environmental and security risks posed by these operations.

However, enforcing these measures is fraught with difficulties. The clandestine nature of the ghost fleet, coupled with the involvement of various international actors, makes monitoring and regulation a complex endeavor. As the global community grapples with these challenges, the situation underscores the need for enhanced international cooperation and the development of robust mechanisms to uphold maritime safety and environmental standards.

The emergence of Russia's ghost fleet is a testament to the adaptability of global trade networks in the face of geopolitical constraints. While it serves as a lifeline for Russian oil exports amid sanctions, it also brings to the fore significant challenges that demand coordinated international attention. Balancing the enforcement of sanctions with the imperative of maintaining maritime safety and environmental integrity remains a delicate and pressing task for policymakers worldwide.

The emergence of Russia's ghost fleet is a testament to the adaptability of global trade networks in the face of geopolitical constraints. While it serves as a lifeline for Russian oil exports amid sanctions, it also brings to the fore significant challenges that demand coordinated international attention. Balancing the enforcement of sanctions with the imperative of maintaining maritime safety and environmental integrity remains a delicate and pressing task for policymakers worldwide.