Dangerous Waters: How Russian Sanctions Affect Maritime Trade

Economic sanctions are utilised to apply pressure on a nation state in a non-violent approach. The idea is to minimise the use of a military force in a way that will politically undermine another government. Most Western states welcome the use of sanctions as this precludes the need to put troops in harm’s way and opens the door to diplomatic discussions. This scenario is especially important when dealing with a state that is in possession of nuclear arms. Russia’s invasion into Ukraine in 2022 triggered sanctions from the United States, United Kingdom, EU, as well as other partners, with the goal to curtail their assets in the energy sector. One of the most impactful sanctions enacted was the oil price cap. Russian crude oil was capped at $60 per barrel for exports. In November 2025, further sanctions were imposed on Russia’s two largest oil companies, Rosneft and Lukoil. Applying this sanction on the largest companies means that buying or shipping their oil will be at risk of losing access to the U.S. banking system. This system of sanctions was meant to hurt Russia’s economy to the point it would not be able to fund the war effort against the Ukrainians. Instead, the Russians developed a shadow fleet of aging tankers to move their most valuable export.

Shadow tankers are camouflaged under several layers of protection. First, they are owned and operated by businesses that are located in other countries. These countries are not sanctioning the nation state so they are able to provide a level of safety to the business assets. Next, all ships require a flag to represent their nationality. The maritime flag law is explained here:

“When a ship is sailing on the high seas, the flag state generally has exclusive legal power over the vessel and the people on board. This ensures that a ship is always under some form of legal authority while traveling through international waters. However, there are specific exceptions to this rule that are recognized by international treaties.”

This does not mean that the business and the vessel need to be from the same country, and for Russia to move this shadow through international waters, none of these aspects should be linked to avoid Western sanctions. The system may seem complex, but for Russia, it is a simple solution that helps maintain their energy economy. 

Within this grey area, there is also risky behaviour of poor maintenance, removed tracking devices, and operating without legitimate maritime insurance. This can be very dangerous for other maritime trade as they may be moving blindly during poor weather. The tracking system is meant to avoid collision with other vessels as well as emergency situations. There is also a potential for oil spills with these tankers as they are much older and not retrofitted for current standards. This can lead to immense environmental destruction as well as danger to the crew on board with the risk of collision or fires. To mitigate these behaviours, the requirement to provide proof of maritime insurance at ports from legitimate insurers is meant to deter shadow fleets. This has sprung a new vulnerability into sanctions busting where shadow fleets are procuring maritime insurance outside of Western nations. Using the same tricks of obscuring the registration of the businesses that are transporting the oil, the underwriters of these vessels are also coming from some of the same countries that are allowing the shadow fleet to be able to deliver their exports. Like most money laundering systems, the shadow fleets are moving under the radar and the difficulty to disrupt this system cannot be resolved with sanctions alone.