MADRID (EFE).— The Russian invasion of Ukraine in 2022 and, more recently, the war in Iran have shown the existence of “ghost fleets” of oil tankers or LNG tankers that take advantage of loopholes in international maritime law to facilitate, under a flag of convenience, the export of hydrocarbons from a State subject to international sanctions.
This phenomenon – which in itself is not new – has a special impact on large producing countries, such as Russia or Iran itself, which before the escalation of tensions in the Persian Gulf shipped a significant part of its production on large oil tankers to anticipate the risks of a closure of the Strait of Hormuz.
This maneuver has benefited Iran, which has been able to respond to trade agreements signed prior to the “de facto” closure of this energy corridor, through which around 20% of the world’s oil and gas circulates.
This represents “a significant delivery of money in times of difficulty,” EAE Business School professor Eduardo Irastorza explains to EFE.
How do they work?
The “ghost fleets”—from the English “shadow fleet”—are controlled or acquired “ex profeso” to serve the interests of the sanctioned State, although they do not have to be state-owned, but can operate at its service through charter formulas, clarifies Dr. Rafael J. Muñoz.
In his analysis The phenomenon of the ghost fleet and its risks for Spain, published by the Elcano Royal Institute, Muñoz explains how this phenomenon operates within a legal and commercial framework that allows it to formally navigate within the current legal system.
Thus, in the maritime sector it is common for shipowners to cede the operation of their vessels to third parties through time or voyage charter contracts, to reduce risks and guarantee income.
This process is channeled through “brokers”, who place ships on the freight market in exchange for commissions. Insurers also intervene, covering accidents through policies, and classification societies, in charge of certifying that ships meet minimum international standards.
Misleading identification
Added to this, continues Muñoz, is the flag State, whose flag determines the legal nationality of the vessel regardless of the origin of the shipowner, which adds more opacity to the system.
“(The ships) normally belong to large shipping companies that use ships in not very good condition, but that can still fulfill their function because they operate with flags of convenience, with undemanding countries and that practically do not charge taxes on them,” says Irastorza, who describes it as a “very profitable” business.
The practice of hoisting on a ship a flag different from that of its true nationality has been documented since ancient times, although it was not until the beginning of the 20th century when North American shipowners realized the potential tax savings of registering vessels in territories such as Panama or Liberia.
Muñoz gives an example of opacity to the ‘Prestige,’ the protagonist of Spain’s biggest environmental disaster. It was a Bahamian-flagged ship, traceable to Liberian capital and its shipowners most likely Greek, with Russian-Swiss ownership of the cargo, all under front companies.
Comoros, Gabon, Djibouti and Palau are some of the flags that shelter these networks.
As with Russia or Iran, the hoisting of convenience allows States subject to sanctions to continue selling their hydrocarbons with ‘ghost ships’ that sail under another flag that is not the sovereign of a supposedly enemy country or with which they have problems, says the EAE Business School professor.
Likewise, the receiving countries, mainly China, which since the United States took over Venezuela’s production, have had their energy resources “seriously compromised” benefit from these fleets, “hardly detectable” when sailing without geolocation so as not to be identified, he continues.
Russian precedent
Those also known as “dark fleets” are not new. Decades ago, as Western governments imposed economic sanctions on Iran, Iraq, North Korea and Venezuela, their ships were clandestinely integrated into global maritime trade.
But since the Russian invasion of Ukraine, its expansion has accelerated, and after the G7 introduced a cap on the price of Russian oil, around 1,000 tankers have joined the “ghost fleet” to transport crude oil sold above that limit, writes analyst Ignacio Urbasos.
With the support of China, Moscow has also brought together a fleet of LNG carriers to transport liquefied natural gas (LNG) subject to sanctions, which has reproduced the structure of the “shadow fleet.”
A turning point because, unlike crude oil, where the transport of sanctioned cargoes on ships with opaque ownership or without insurance has been common for a long time, the LNG sector had never faced a comparable situation, because the ships to transport methane are much more expensive and technically complex.
Vessels carrying sanctioned oil can keep prices low
Greater offer
Regarding how “ghost ships” impact energy markets, Professor Eduardo Irastorza predicts that they will keep prices “lower” to the extent that oil can meet its demand, especially “Western developed countries.”
Common practice
“Let’s not think that we are not taking advantage of the ‘ghost fleets’ of Russia, Iran or any other country that is negotiating with this, such as India, which buys Russian oil and, in turn, sells it to third parties,” he said, regarding the purchase of said crude oil.
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