German Shipping Companies Profit from Russia's Shadow Fleet

Recent investigations reveal that German shipping companies are earning significant profits from Russia's shadow fleet, a network of vessels with ambiguous ownership often lacking insurance. This fleet is employed to circumvent Western sanctions by facilitating oil exports to third-party nations. Approximately 650 ships are classified as part of this shadow fleet, with around 230 originating from European or US-affiliated shipping companies, all sold after the onset of the Ukraine conflict.

Among the reported sales, 11 vessels were originally owned by German operators, generating an estimated profit of around 200 million euros for these companies. This information is supported by data from the Kyiv School of Economics Institute, which was made available to the investigative team.

The spike in demand for used tankers following the start of the Russian invasion of Ukraine has been dramatic. Notable German shipping firms involved include the Hamburg-based Schulte Group and Dortmund's Solomon AG, both of which claimed that negotiations to sell their vessels had begun prior to the war. They also stated that due diligence on the buyers did not reveal any irregularities.

The buyers of the tankers are often not registered in Russia. For instance, the Schulte Group sold a vessel to a company based in Hong Kong, while Solomon AG reportedly sold one to a Turkish entity. The Dortmund-based firm mentioned that the purchaser was actually a Greek company.

Industry experts have indicated that shipping companies were likely aware of the implications of their sales, especially given the heightened demand for vessels in the shadow fleet. The German Shipowners' Association emphasized the importance of responsible actions from sellers to ensure that their ships are not used for illicit activities. They also pointed out that banks and trustees should scrutinize transactions for potential risks.

Before the escalation of the conflict in Ukraine, the shadow fleet was already in existence, utilized by countries like Venezuela, Iran, and North Korea, all facing US-imposed sanctions on their energy sectors. However, since the conflict began, the shadow fleet has reportedly expanded significantly, now accounting for about 17% of the global oil tanker fleet, as per assessments from the Atlantic Council.

In addition to bypassing the oil price cap and other sanctions, the shadow fleet allows Russia to tackle the challenge of maritime insurance. All commercial vessels are required to have Protection and Indemnity (P&I) insurance to cover potential damages at sea, a service primarily provided by EU and UK firms that have imposed sanctions on Russia. Consequently, many of the vessels in the shadow fleet either lack proper insurance or have coverage deemed inadequate, posing heightened risks for crew members.

Moreover, the absence of sufficient insurance means that if an accident occurs involving a shadow fleet tanker and a western vessel, the liability may fall on the Western country involved, thereby categorizing the shadow fleet as a significant non-military asset in Russia's operational strategy.