EU Agrees to New Sanctions on Russia, Targets ‘Shadow Fleet’

The Liberian-flagged oil tanker Ice Energy (L) transfers crude oil from the Russian-flagged oil tanker Lana (R) off the shore of Karystos, on the Greek island of Evia, on May 29, 2022. Angelos Tzortzinis/AFP

The European Union has reached an agreement on new sanctions against Russia, focusing on the “shadow fleet” of tankers used by Moscow to evade Western restrictions on oil trade.

This marks the latest in a series of EU sanctions since February 2022, when the decade-long conflict between Russia and Ukraine escalated into a full-scale war. As the war drags on, the EU has increasingly focused on cutting off revenues that keep Russia’s war machine running.

“I welcome the adoption of our 15th package of sanctions, targeting in particular Russia’s shadow fleet,” European Commission President Ursula von der Leyen wrote on X on Dec. 11.

While the full details of the sanctions were not immediately publicized, the Hungarian Presidency of the Council of the EU has confirmed that the list of individuals and entities subject to existing sanctions will be expanded.

Among the additions are six China- and Hong Kong-based companies, whose assets will be frozen. One Chinese citizen also will face a visa ban. The names of the sanctioned persons and firms have not been disclosed.

Previously, Chinese companies accused of selling components and equipment to Russia’s military industry have been added to a blacklist of entities banned from buying products made in the EU. This latest package, however, is the first instance of direct sanctions being imposed on Chinese businesses for their role in Russia’s war in Ukraine.

The package is also the first set of sanctions agreed upon during Hungary’s presidency of the Council of the EU—a relief to those who had anticipated slower progress on sanctions due to Budapest’s cautious approach vis-a-vis Moscow.

EU foreign ministers will formally vote on the package when they gather on Dec. 16.

‘Shadow Fleet’ in the Crosshairs

The centerpiece of the new sanctions is aimed at the “shadow fleet,” which consists of aging, poorly maintained tankers—some of them more than 20 years old—whose obscure ownership and insurance structures allow them to sidestep Western sanctions. The new measures will bar more of such vessels from EU ports.

These ships usually operate under “flags of convenience” from countries such as Panama, Liberia, and the Marshall Islands. An EU report in November says that their operators use deceptive tactics, including transmitting falsified data, disabling transponders to evade satellite detection, and conducting multiple ship-to-ship transfers to obscure the origin of the oil.

Russia has been using the “shadow fleet” to bypass the price cap that Western allies imposed in 2022 on seaborne Russian crude oil. The cap was set at $60 per barrel and prohibits Western companies from providing services such as insurance, financing, or registration to tankers that sell Russian oil above that price.

The sanctions have made transporting Russian oil from the Russian Far East to China and India highly lucrative. Now the largest buyers of Russian oil—China and India—refine it on their own shores before exporting it to the West as gasoline and diesel under different labels.

Russia has invested an estimated $10 billion in developing its “shadow fleet.” While no official number exists due to Kremlin secrecy, S&P Global estimates that approximately 600 such tankers operate in the Russian oil trade.

Baltic States Compromise

Discussions on the package began last month, with the last hold-outs being Latvia and Lithuania.

The two Baltic states took issue with a clause that would allow EU companies to continue operating in Russia, reported LRT, Lithuania’s public news service.

The provision was designed to help companies seeking to withdraw from Russia but facing practical difficulties in doing so. However, critics called it a “loophole” that would undermine the effectiveness of sanctions.

Latvia and Lithuania dropped their objections after closed-door negotiations. Hours before the deal was struck, von der Leyen announced a new funding package to six member states bordering Russia and Belarus, namely Finland, Estonia, Latvia, Lithuania, Poland, and Norway.

“They are securing our common borders. So today we’re making available €170 million to support their efforts,” she wrote on X.