The ‘Dark Fleet’ powering Putin’s Ukraine war machine is out of hand. It’s time to act

“Shipping – it’s one damned thing after another,” the editor of Lloyds’ List wrote last week.

He was referring to disruptions in the Red Sea and Panama Canal and now the exponential growth of the so-called ‘dark fleet’ of oil smugglers who are propping up the Kremlin’s finances and sustaining Russia’s war machine in Ukraine. It’s yet another example of the shipping industry being compromised far from home in a way that nonetheless affects us all.

Russian oil, it has been decided, has to be kept moving around the world. As tempting as it would be to turn it off, the resulting market instability would be intolerable. (Ironically, Ukrainian refinery strikes are making the problem worse because without those storage facilities, Russia is obligated to export at a faster rate than it was before.) The solution agreed upon between the G7, the US, the UK and the EU was to set a price cap per barrel, above which Russia cannot trade. So you keep the oil moving but at a rate at which Putin will make less money. So far, so logical.

Two fleets emerged from this decision. The first was a group of ships that moved the oil as part of transactions at prices below the agreed cap, having their homework marked at every stage. The second, which has always been there but grew substantially, was the ‘dark fleet’, moving Russian oil in large quantities to countries such as China, India and Iran in higher priced deals which the G7/US/UK/EU would want to prevent.

The legitimate, respectable shipping industry has to be able to do deals in – and operate to and from – G7 and EU nations, so the respectable shipping industry won’t touch deals above the price cap. The dark fleet ships are often ageing, poorly maintained, unregistered and three-quarters of them are uninsured. They are happy to run the Houthi gauntlet in the southern Red Sea – some have been hit doing so. During the summer ice window they have used the Northern Sea Route along Russia’s arctic coast: ice remains a year-round hazard there and this increases the risk of a major spill. The rogue tankers are also conducting frequent ship-to-ship transfers at sea and routinely going dark on their identification transponders. All of these things increase the chance of accidents.

Aside from preventing Russia’s economy being squeezed as envisaged, then, the dark fleet ships are an environmental disaster waiting to happen. And while it is mainly oil at the moment, gas carriers are not far behind. In the meantime, regular law-abiding shipping companies, the majority, are getting increasingly exasperated at the impact this activity is having on their reputations.

A major issue is that the price cap is being enforced in a confusing, inconsistent and overly bureaucratic manner. It is also quite easy to forge compliance documentation. The price cap only applies to countries which have extensive dealings with the G7 nexus – if you’re outside that, you are free to do what you want. The net result is more and more ships are going across to the dark fleet where they are free from the price cap, associated bureaucracy and the requirement to be registered or insured. At the last count, about 800 tankers had made this move, i.e. 20 per cent of the global total of about 4000.

This has meant some changes. Normally, most ships are registered in places like Panama, Liberia and the Marshall Islands. To those unfamiliar with the shipping business these might sound dubious, but in fact they are respectable registries: the Liberia one, for example, is run by a US owned and operated company based in Virginia. It has operated smoothly even when Liberia itself was in the throes of civil war, and has a good reputation for safety. The Liberia registry would decline to do business with any vessel that seemed likely to be violating the price cap and thus no such vessel can fly the Liberian flag.

The last six months, however, have seen a surge in African countries such as Guinea Bissau, Gabon and even landlocked Eswatini (Swaziland as was) registering ships. There has been a similar uptick in insurance companies being created, many in India, who will insure these vessels when the traditional Protection and Indemnity (P&I) ‘clubs’ will not. The traditional P&I clubs normally provide insurance for 85 per cent of the world’s shipping: they had a meeting with the UK government earlier this week to make it clear that the price cap solution is becoming unworkable and that these phoenix fleets, parallel fleets or dark fleets are the inevitable outcome.

There has been criticism of those making the rules. Tom Keatinge of RUSI said at a hearing on Tuesday that “there was not a high degree of expertise” within the Treasury’s Office of Financial Sanctions Implementation (OFSI). Lloyds of London said, “OFSI may not have sufficient specialist resources for a full appreciation of the implications of seaborne transportation of oil”.

It’s harsh to pick on one department in one country because the problem is clearly much wider than that. When you consider the number of countries involved here, each with their own agendas, interpretations and systems, the fluid nature of the sanctions, the complexity of shipping in general and then the willingness of some countries to break the rules to make a quick buck, you can see why this situation has developed.

Fixing this will not be easy. Diplomatic pressure probably can’t do a lot to suppress the dubious new African registries and Indian insurers. There’s some indication that naval presence can deter some of the most egregious behaviour: two days ago the Greek Navy conducted a naval exercise in the Laconian Gulf, a regular place for ship to ship transfers of illegal Russian oil. Merely issuing a Notice to Mariners advising ships to keep clear drove all the illegal transfers out of the area. Naval presence can have an effect.

Stepping up beyond this would be highly problematic, however. The Western powers spend a lot of time and effort defending and preserving the principle of freedom of navigation (FON) on the high seas. US and other warships frequently conduct passages through places like the Taiwan Strait and the South China Sea to push back against Chinese claims to own those waters, and a large naval task force is currently battling the Houthis of Yemen in an attempt to preserve FON through the Bab-el-Mandeb strait and the southern Red Sea.

International maritime law only permits warships to board foreign flagged vessels on the high seas in certain clearly defined circumstances such as piracy, slave trading etc. If we wanted to board and inspect ships to check that they weren’t violating the Russian price cap, we would need a UN Security Council resolution to operate under, as we had against Iraqi oil smugglers in the 1990s – I was involved in many boardings back then. But as Russia and China are both permanent Security Council members, the chance of getting a resolution this time is zero.

At a recent hearing of the US House Armed Services Committee, Representative Austin Scott asked the Chairman of the Joint Chiefs of Staff – America’s top military officer – if there was a military solution to this. The answer was interesting not just because it was basically ‘no’ but because it suggested that large-scale maritime interdiction was not on the Chairman’s radar. And indeed it would be odd of the Joint Chiefs to be simultaneously conducting “FON Ops” in various locations to preserve freedom of navigation while simultaneously trying to prevent it in others.

It should be clear, of course, that Vladimir Putin does not respect the rules-based international order, and obeys or invokes it only as is convenient to him: his invasion of Ukraine was a clear violation of that order. China has not crossed that line as clearly, but its “Nine Dash Line” claim in the South China Sea, which it backs up every week with violence – though not usually lethal force – is just as without basis under the rules. And Iran has long pushed the boundaries of what is tolerable, both directly around the Strait of Hormuz and via its Houthi proxies in the Red Sea and Gulf of Aden.

A rag-tag Iran proxy militia in Western Yemen can effectively restrict the trade of its adversaries, but the US and its allies cannot. China can violate the maritime rights of its neighbours, and nothing happens. Russia can sell oil to China, Iran – and India – in defiance of the wishes of the Western world, and we cannot prevent it because of the very rules we seek to defend. We don’t even get angry with India for bankrolling Putin’s evil war, quite the contrary. We scramble to do deals there.

It may no longer be time to ask if the rules-based order can continue to stand. It may be time to ask if it has already fallen – after all, we are said to be in a “pre-war” period.

If our enemies can block our trade and violate freedom of navigation, maybe it is time for them to learn that we can do such things too – without a UN Security Council resolution, just as they have no UNSCR to permit their actions. At the moment the violations are entirely one-way.

In the meantime, the likelihood that a dark fleet tanker will deposit its oil all over a beach near you keeps going up.

Tom Sharpe is a former Royal Navy officer