[War & Business] The 'Shadow Fleet' Carrying Russian Oil

The international oil market is undergoing the most severe changes as the Ukraine war prolongs. This is because the traditional oil distribution system has completely transformed due to the implementation of price caps on Russian crude oil and strengthened sanctions against Russia, mainly by Western countries such as the United States and Europe.

The previous distribution process of Russian oil was simple. Crude oil or refined oil was directly supplied according to the order volumes of each European country through about 20 pipelines connected across Europe. Only a portion of the refined oil was transported and sold by oil tankers to countries like the United States, China, and India.

However, with the prolonged sanctions against Russia, the distribution process of Russian oil has become very complicated. As the direct pipelines to Europe have effectively been shut down, most of the export volume has been redirected to China and India. Consequently, Russia now requires more than four times the number of oil tankers than before, but ordering oil tankers has also become difficult due to the sanctions.

Oil products of Rosneft, the Russian state-owned oil company. [Image source=Rosneft official website]

At this time, what appeared to transport Russian oil is the so-called “Shadow Fleet.” Literally, this refers to smuggling-specialized vessels whose nationality, true owners, and operators are all unknown and shrouded in secrecy. These are veterans who used to smuggle Iranian oil in the Persian Gulf and Venezuelan oil in the Caribbean Sea.

These oil smuggling fleets turn off ship location trackers, launder the ships’ nationality, or swap oil on the high seas to sell Russian oil to various countries. Russia, struggling to secure oil tankers, heavily depends on them for most of its exports to China and India, which have grown in importance.

As a result, despite the European Union (EU) starting an embargo on Russian oil from December 5 last year, it has been revealed that about 30% of Russian oil is still being imported by European countries. The Shadow Fleet, which earned huge smuggling profits during the Ukraine war, has gradually expanded in scale and taken on most of Russia’s oil exports, which ranked second worldwide before the war.

Concerns are already rising as smuggling fleets dominate the existing official maritime trade routes. The problem is not only that sanctions against Russia have loopholes but also that the safety of trade routes and the risk of maritime accidents have significantly increased.

Shadow Fleet vessels often cut off communication lines to prevent location tracking, making it difficult to respond properly if they encounter distress at sea. They also risk completely destroying the marine ecosystem in the area if they overload oil recklessly to earn high shipping fees and suffer capsizing accidents.

Moreover, the Shadow Fleet is backed by military organizations such as pirates or terrorist groups from various countries, increasing the risk of armed conflicts if competition for cargo arises. If pirate activity areas expand significantly, as in the Gulf of Aden off Somalia, vital maritime trade routes for many countries could be threatened, potentially leading to the formation of international coalition forces to suppress them, which would require enormous resources.

Especially for South Korea, which is surrounded by sea on three sides and has ongoing maritime territorial disputes in some waters, this is an extremely sensitive issue. The open sea area near North Korea is also one of the major waters where the global Shadow Fleet operates covertly. Strengthening surveillance capabilities and cooperation with neighboring countries to crack down on them is more important than ever.