The “perfect storm” for the shadow fleet: how the West can cut off the Kremlin’s flow of petrodollars
11.02.2026A country fighting for its survival cannot afford to watch Russian tankers, bypassing sanctions, calmly transport oil and finance missiles flying over its cities. Now is a rare moment in world politics when sanctions, the market, and international maritime law have converged—and how the West takes advantage of this “perfect storm” will determine how quickly Russia’s petrodollars dry up.
What is Russia's "shadow fleet" and why is it still operating?
After the introduction of the EU embargo and the G7 price ceiling on Russian oil, the Kremlin, in a few months, assembled a so-called shadow tanker fleet - hundreds of old vessels that were taken out of transparent jurisdiction and re-registered through intermediaries in the UAE, India, Hong Kong and other offshore harbors.3 8 10 This fleet is designed to transport Russian oil and petroleum products without the involvement of Western insurers, banks and shipowners, in order to circumvent restrictions on price and financial transactions.3 9 According to estimates by SP Global and the Kyiv School of Economics, up to 60% of Russian crude oil exports in certain months of 2024–2025 were carried out by such vessels, removed from the control of the sanctions coalition.3 8 .
The mechanics are simple and dirty at the same time. Vessels change flags, owners and names, turn off AIS systems, carry out ship-to-ship transshipments in international waters, and documents are rewritten so that the "Russian origin" of the oil is dissolved through several links of intermediaries.3 7 While the sanctions pressure was limited and unsystematic, this scheme worked: Russia lost part of its margin due to discounts and logistics costs, but not critically, maintaining a high level of oil revenues for the budget.3 10 .
Ripe sanctions: how the EU, Britain and the US are tightening the screws
2024–2025 marked a turning point in the West's attitude towards the shadow fleet. After several packages of sanctions, mainly targeting banks and companies, the EU and the UK moved to a direct attack on tankers - the actual "circulation carriers"4 5 In May 2025, the EU approved a sanctions package that added 189 shadow fleet vessels to the blacklist, bringing the total number of blocked tankers to 342, and later to almost 600.4 6 8 These vessels were banned from entering EU ports, accessing insurance and maintenance services, effectively losing the legal space to operate on European routes.4 6 .
In parallel, Britain is forming its lists, having already blocked over a hundred tankers related to Russian oil exports and expanding restrictions to operating companies, insurers, and traders.4 6 The US, for its part, through OFAC, has been consistently adding to the SDN list both individual vessels and companies involved in the transportation of oil above the price ceiling, effectively introducing secondary sanctions.3 9 The Kyiv School of Economics estimates that as of the beginning of 2025, 276 tankers were already under coalition sanctions, which seriously complicates the logistics of Russian exports.3 .
"Perfect Storm": When Three Factors Hit the Kremlin Simultaneously
The term “perfect storm” regarding the shadow fleet is fully justified today: three major factors are simultaneously putting pressure on Russian oil revenues. The first is the strengthening of sanctions and their stricter enforcement: not only new lists of vessels, but also real cases of confiscation of tankers and cargo, as happened with the vessel Eventin, detained by German customs in 2025 on the basis of violations of environmental and safety requirements7 The second is a structural decline in Russian oil prices relative to global benchmarks due to discounts that the Kremlin is forced to grant to India, China, and other buyers to offset risks.2 3 .
The third factor is the internal limitations of the shadow fleet itself. Old ships break down more often, insurance against real risks (environmental disasters, accidents) is either unavailable or expensive for them, routes are longer, and therefore each voyage is slower and more expensive.3 5 As a result, according to European institutions, Russian budget revenues from oil have decreased by tens of billions of euros, and the volume of transportation by sanctioned vessels has fallen by more than 70% in certain directions.4 6 This is not yet an "oil blockade", but there is already a noticeable shortage of resources for the military machine.
How exactly does Russia circumvent the embargo and price ceiling?
Despite increased pressure, the Kremlin still manages to divert a significant portion of the flows into the “gray zone.” Analysts describe several key schemes for circumventing the embargo and price cap: changing the flag and jurisdiction of the vessel (often to little-known registries without strict supervision), using “one-day” companies in third countries, multi-route transits through intermediaries, and transshipments in neutral waters.5 7 8 . Changing the commodity code after processing is another loophole: oil that passes through refineries in third countries formally ceases to be considered “Russian,” even if control over the flow and margin remains with Russian structures.7 .
An important role here belongs to states that did not join the sanctions coalition, but have become key buyers and "hubs" for Russian oil: India, China, Turkey, and some Middle Eastern countries.3 5 It is through their ports that a significant part of shadow supplies passes, and their companies, insurance and financial structures often act as facades for the real Russian beneficiaries.3 9 Without increased engagement with these countries and holding intermediaries accountable, any sanctions against the shadow fleet risk turning into a race against the shadow.
Tools of pressure: from confiscations to maritime law
The last two years have shown that sanctions bans are not enough - mechanisms for physical interception of schemes are needed. The example of the tanker Eventin, confiscated on the basis of violation of MARPOL norms and IMO resolutions, demonstrates: maritime law provides sufficient grounds for action against shadow fleet vessels, if states are willing to use these tools7 . We are not only talking about sanctions lists, but also about enhanced port control, insurance coverage requirements, document and route checks, sanctions for disabling AIS or falsifying cargo declarations.7 11 .
Some experts suggest going further: banning servicing for ships with questionable histories, restricting access to bunker fuel, water, and port infrastructure even outside of sanctions regimes, using national environmental and safety legislation.7 11 . An important detail: funds from the confiscation of ships and cargo can go not just to the budget of a particular country, but specifically to the reconstruction of Ukraine - this creates an additional incentive for governments and societies to strengthen control over shadow transportation.7 .
Why it's critical for Ukraine: petrodollars as fuel for war
For Kyiv, the fight against the shadow fleet is not a technical issue of international compliance, but a matter of survival. Up to 50% of Russia's foreign exchange earnings in the pre-crisis years were provided by oil and oil products, and even after the introduction of the embargo and price ceiling, these earnings remain a key source of financing the war.7 10 If the sanctions coalition cannot cut off this flow, Russia will remain a belligerent economy — with the ability to compensate for the loss of equipment and missiles through longer, but still profitable export routes.3 10 .
Analytical reports from the Kyiv School of Economics model: in a scenario of weak implementation of sanctions, Russia's oil revenues could again grow to $160+ billion per year, while consistent pressure on the shadow fleet could cut off tens of billions, without which the Kremlin would have to cut military spending or make political compromises.3 For Ukraine, this means a direct connection: each blocked or confiscated tanker means a conditionally minus several hundred missiles or tanks that Russia will be able to finance. Therefore, the topic of the shadow fleet should be a permanent part of the Ukrainian dialogue with Washington, Brussels, and London.
What else can be done: a window of opportunity for “extra pressure”
Despite the current progress, the toolbox is far from exhausted. Experts from Brookings, SP Global, and European think tanks suggest several additional steps. First, systemic secondary sanctions against any companies—from insurers to traders—that knowingly service the shadow fleet, with complete disconnection from the dollar and euro systems.3 9 . Second, expanding data sharing between maritime administrations, customs, financial intelligence and independent ship trackers to see transport and ownership chains in real time3 9 .
Third, work with key states — registrars and buyers of Russian oil. Even if India or China do not formally join the sanctions, we can build a framework with them for responsibility for environmental risks, transparency of contracts, and compliance with basic maritime safety standards.3 5 It is important for Ukraine that such a policy does not remain a matter of backroom negotiations: Kyiv must constantly bring the topic of the shadow fleet into the public space - through the media, international platforms, and work with think tanks that shape the agenda in the capitals of allies.
Sources
- LIGA.net: an analytical column about the "perfect storm" for the shadow fleet, the impact of sanctions on Russian oil revenues, and Ukraine's role in increasing pressure.
- LIGA.biznes: news about increasing discounts on Russian oil and pressure on the Russian budget amid tightening transportation restrictions.
- Kyiv School of Economics: "Russian Oil Tracker" (January 2025) — data on export volumes, dependence on the shadow fleet, and sanction restrictions on tankers.
- SP Global Commodity Insights: materials on EU and British sanctions against shadow tankers, the number of ships blocked and the effect on oil flows.
- Brookings Institution: analysis of the origins of the Russian shadow fleet, the role of Western companies in its formation, and the potential of Europe's sanctions lever.
- SP Global Market Intelligence: research on the formation, operation and risks of the shadow fleet for sanctions compliance.
- Hague Research Institute: review of the EU embargo and the G7 price ceiling, circumvention schemes through the shadow fleet and legal tools to combat it.
- EU Council / official statements: information on the 17th and subsequent EU sanctions packages, which expanded the blacklist of Russian tankers and companies.
- Focus.ua: article about how the pursuit of shadow fleet tankers is hurting the Kremlin's ability to finance the war.
- Bloomberg: news about the EU's preparation for new sanctions against the Russian shadow fleet and discussion of strengthening control over ship registrars.
