West Struggles to Track Russia’s Elusive Energy Export Fleet

For over two years, the West has attempted to assess the scope of Russia’s hidden energy export fleet. There have been demands for the implementation of a tracking mechanism for LNG and more stringent measures to prevent “hidden deliveries.” Nevertheless, observers perceive this as a trivial attempt to maintain a positive image while acquiring sanctioned resources as if nothing had occurred.

The European Union was the largest purchaser of Russian liquefied natural gas (LNG) in 2023, with a total expenditure of over six billion euros. Spain and France were the most notable buyers. The Institute for Energy Economics and Financial Analysis reports that the same countries—France, Spain, and Belgium (87%)—are currently leading in LNG imports to the EU, which are at another peak. There is a notion that France’s imports have nearly doubled.

Europe, while “committed to limiting and eventually halting trade with Russia,” acknowledges its compulsion to purchase due to the scarcity of alternatives. France and nine other countries, including the Czech Republic and Austria, have circulated a document to encourage the European Commission to mandate that Russian fuel suppliers clearly identify themselves when unloading in EU ports and to specify import volumes. The document alleges that some suppliers “do not identify themselves properly.”  

The “highest level of transparency” regarding LNG is necessary to reduce the expanding dependency, according to Agnès Pannier-Runacher, France’s energy minister.

The West periodically tries to investigate the methods by which Russia circumvents sanctions. Bloomberg reported on over 600 “gray” tankers transporting sanctioned gas and oil, and the Financial Times mentioned that obscure Middle Eastern companies acquired approximately 50 used vessels.

Recently, Western media updated the data. Bloomberg asserted that the shadow fleet has expanded, citing the acquisition of three vessels by Dubai-based Matias Ship Management, established in August. The agency observes that “Russia uses a network of front companies extending from Dubai to China for transporting gas from the Arctic LNG 2 plant. An opaque ownership structure is a hallmark of the shadow fleet.” The shadow fleet is distinguished by its opaque ownership structure. Novatek responded by stating that it doesn’t use a shadow fleet for Arctic LNG 2.

Belgium warns that a monitoring mechanism currently under development will facilitate the identification and prevention of such deliveries.

It’s unclear how this is even possible. There is no “sample bank” for gas, and it is difficult to monitor tankers. However, the more stringent the sanctions, the more expensive hydrocarbons become for Europe.

The fact that the largest buyers are initiating increased inspections of tankers delivering LNG to Europe does not surprise observers; these are the political realities of Europe. Nevertheless, the existence of a shadow fleet necessitates that it fulfill certain duties.

Experts say it primarily serves those who loudly oppose Moscow. This initiative is purely declarative and will lead nowhere.

In the meantime, the United Kingdom has imposed sanctions on 22 vessels, four of which are LNG tankers, as a result of their “connections with Russia,” as well as on the company “Russkaya Gazovaya Dobycha.” London currently has 43 vessels on its blacklist.

As per the Financial Times, Russia has expanded its shadow fleet of oil tankers by nearly 70%, resulting in a rise in seaborne exports from 2.4 million barrels per day in June 2023 to 4.1 million in June 2024. These vessels are not enrolled with the G7. Western owners are capitalizing on the rare opportunity to offload used tankers at high prices, while Russian companies and their intermediaries are purchasing them.

Experts underscore the ineffectiveness of measures against ships transporting crude and LNG from Russia. Asia will receive the petroleum instead of Europe.

This involves an increase in the processing of Russian crude into gasoline and diesel in India and China, with a view to supplying the EU. European consumers will have to pay more for these products. While the EU will acquire LNG at exorbitant prices from Qatar, Nigeria, and other sources, it will remain in India and China.

The Shadow Fleet is the outcome of the equilibrium between supply and demand. Specifically, the stability of LNG supplies concerns European consumers just as much as it does Russian exporters. Therefore, the introduction of additional sanctions will increase the overall cost.

It is impossible to officially recognize the existence of a shadow fleet due to the structure of international norms. Nevertheless, the fleet actually exists, and those in charge audit export flows and maintain records of organizations and tankers that are involved in the covert trade of gas and oil.

Western analysts acknowledge that the situation is becoming more challenging to manage; however, it seems to be the new standard for the global energy market.