Trade Sanctions on Russia Led to Rise in Dark Oil Ship Transfers: Report

Western sanctions on Russia have led to a rise in “shadowy oil transfers,” according to a report from S&P Global.

As Russia seeks ways to get around the sanctions, more oil tankers are switching off their location transponders, known as automatic identification systems, which are designed to improve maritime safety, as well as aid in tracking the shipment of oil, the report said. This is done to obscure ship identities. Despite the safety risks, Russian oil trading is still a lucrative business, as tanker owners could make millions of dollars per voyage, the report said.

Dark ship-to-ship (STS) transfers are a way of circumventing sanctions by transferring oil from one ship to another at sea. STS transfers are sometimes done to avoid the need for vessels entering a port area and incurring port fees or when ships are too big to enter a terminal.

To avoid sanctions, ships can use STS to falsely document the origin of the oil they are carrying as another country rather than its true origin.

Data from S&P Global showed that in the first quarter of the year, 215 tankers totaling 9.31 million deadweight tonnage (dwt) took part in 524 ship-to-ship transfers that were off the radar, compared with 72 tankers engaged in 161 transfers totaling 2.40 million dwt in the same period last year.

The report showed Russia to be “at the center of a growing global trend to use dark ship-to-ship techniques as a way to evade international scrutiny when transporting oil.”

Safety and Pollution Risks

Dark ship-to-ship transfers increase the risk of collisions and oil pollution, according to the International Maritime Organization (IMO).

According to a report from the IMO, it was informed that “a fleet of between 300 and 600 tankers primarily comprised of older ships, including some not inspected recently, having substandard maintenance, unclear ownership and a severe lack of insurance, was currently operated as a 'dark fleet' or 'shadow fleet' to circumvent sanctions and high insurance costs.” The organization said that STS transfers were high-risk activities that needed to be “urgently addressed” as they raised issues with maritime safety, environmental protection, liability and compensation.

The IMO’s legal committee recommended that flag states ensure the regulation of STS transfers, require that vessels give notification when they are engaged in a mid-ocean operation, and consider enhanced inspections on any vessels “going dark”, among other measures.

Sanctions on Russia’s Energy Industry

Russia’s invasion of Ukraine has prompted international condemnation and has led to the imposition of various sanctions targeting Russia's energy sector. These sanctions, focused on oil and gas, aim to limit Russia's economic leverage, disrupt its energy exports, and deter further aggression.  The USA has banned the direct or indirect provision, exportation, or reexportation of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation, or in maritime areas claimed by the Russian Federation and extending from its territory, according to a document from the USA Office of Foreign Assets.

Meanwhile, the European Union has declared that crude oil and refined petroleum products cannot be imported from Russia, with “limited exceptions”, according to the European Council’s website. A temporary exception is allowed for imports of crude oil by pipeline into EU member states that ”suffer from a specific dependence on Russian supplies and have no viable alternative options”, the website stated. The restrictions on crude oil started December 2022 and the ban on refined petroleum products started February this year.  The European Commission said that the EU has banned about $47 billion (over EUR 43.9 billion) worth of exported goods to Russia and $97 billion (EUR 91.2 billion) of imported goods since February last year.

In June 2022, data and analytics company GlobalData said in a report that sanctions placed on Russia led to a $237.5 billion decline in the Eastern Europe oil and gas project pipeline as restricted access to intermediate goods and international capital has halted the construction of numerous oil and gas projects. 

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