Oil & Gas

Russian fuel continues to reach European markets despite strict sanctions through the use of "shadow tankers" and alternative transshipment points. Following the imposition of Western sanctions in response to Russia's invasion of Ukraine in 2022, Moscow has adapted by utilizing fleets that operate covertly and obscure their activities from digital tracking systems.

A key new transfer hub has been established off the coast of Greece, near the Aegean islands and Chios, replacing the Gulf of Lakonian, where Greek naval exercises have disrupted similar operations since November 2024.

According to data from analytics firm Vortexa, Russia currently exports about one million barrels of diesel, fuel oil, and other oil derivatives to Europe each month through this new hub. These shipments bypass sanctions such as price caps on sea-transported oil and restrictions on shipping and insurance by involving multiple intermediaries and secret ship-to-ship transfers.

This strategy ensures that sellers and buyers remain anonymous, further complicating enforcement of sanctions. However, the use of shadow fleets has expanded as a vital workaround for Moscow, given that oil revenues constitute over 70% of Russia's budget.

The relocation of transshipment activities near the Aegean islands coincides with Greece's naval exercises, which began in November 2024 and will continue through March 2025. The exercises have significantly reduced Russian fuel swapping in the Gulf of Lakonian, previously the primary hub for these covert operations. Now, Russian tankers discreetly transfer cargo at sea, avoiding tracking systems and increasing the involvement of intermediaries, making it challenging to trace the origin or destination of shipments.

The rise in shadow fleet activity has sparked environmental concerns, particularly regarding the safety of these operations. Nonprofit DanWatch reported that in 2023, 4% of shadow tankers carrying Russian oil bypassed Danish pilotage services—a critical safety measure required for navigating the Danish fjords.

The lack of adherence to such protocols raises the risk of oil spills and other environmental disasters. The International Maritime Organization (IMO) has long advocated for guided navigation in such waters to ensure safe passage and protect the surrounding ecosystems.

The shadow tanker phenomenon has also caused market distortions, particularly in the liquefied natural gas (LNG) sector. The European Union’s July 2024 restrictions on Russian LNG exports have led to increased demand for shadow tankers, driving up prices for older vessels.

This mirrors the surge in tanker prices seen in late 2022 and 2023 as Russia’s reliance on covert methods deepens. While Moscow’s strategies sustain its vital energy exports, they raise significant concerns about regulatory enforcement, environmental safety, and global market stability.