The Dark Fleet refers to a network of vessels that operate outside of standard maritime regulations, often used to transport sanctioned goods such as oil.
These shadowy vessels are also referred to by terms such as Parallel Fleet and/or Shadow, Gray or Ghost fleet. The terms are all manifestations of the same thing – ships that are owned, structured, and operated to avoid exposure to sanctions.
Fleet of ships
“In fact I would prefer that we use the term Parallel Fleet because it more accurately describes what it is,” says Mike Salthouse, Head of External Affairs, of NorthStandard, a Protection and Indemnity (P&I) insurer.
“Specifically, it is a fleet of ships operating in parallel to mainstream shipping while avoiding use of service providers that are subject to sanctions legislation.”
Modern shipping sanctions
Sanctions were to be enforced not just against the sanctions-breaking vessel but also the services
Modern shipping sanctions can be traced back to the introduction of the U.S. Comprehensive Iran Sanctions Accountability and Divestment Act 2010 or “CISADA”.
Under CISADA for the first time, sanctions were to be enforced not just against the sanctions-breaking vessel but also the services (for example insurance, class, flag, banks) that the vessel used.
EU/G7 Coalition adopting sanctions
As a result, all maritime service providers sought to distance themselves and introduce contractual termination clauses in their service contracts forcing such vessels to either trade without such services or to access them from non-sanctioning jurisdictions.
This led immediately to the creation of mainly Iranian ships that could continue to carry cargoes subject to western economic sanctions – such as Iranian oil. However, the fleet has grown exponentially following the EU/G7 Coalition adopting sanctions targeting Russian shipping. Today the majority (but not all) of the Dark Fleet is engaged carrying Russian cargoes – but other trades include Iran, North Korea, and Venezuela.
Protection of the marine environment
Dark Fleet undermines transparent governance policies that ensure the welfare and safety
“It might be that a removal of Russian sanctions would remove the need for such a fleet,” adds Salthouse. “But for so long as nations use maritime sanctions as a foreign policy tool, my own view is that the Dark Fleet phenomenon will continue to facilitate sanctioned trades.”
The Dark Fleet undermines transparent governance policies that ensure the welfare and safety of those on board and the protection of the marine environment. In recent years, the safety of tankers has improved significantly. These improvements have been driven by factors such as greater operational oversight from the oil majors, younger double hull vessels, greater operational scrutiny, and more rigorous legislation. Safety has been prioritised over all else.
Transport oil using ships and services
“The commercial dynamics that apply to the Dark Fleet are very different,” says Salthouse. “The overwhelming commercial imperative is not safety but to transport oil using ships and services to which sanctions legislation does not apply. As such, the customer and regulatory oversight is much reduced.”
The vessels used by the Dark Fleet also tend to be older. Even if it were possible to find shipyards that were prepared to build for use carrying sanctioned cargoes (and so risk secondary sanctions depriving them of access to western financial markets and insurers), the long build times mean that such ships would not become available for several years. As such, the vessels that comprise the Dark Fleet tend to be end-of-life and aged 15 years or older.
Commercial reinsurance markets
The insurers of the ship will likely have been unable to access commercial reinsurance markets used
If and when an accident happens, the ability of the insurer to respond by using commercial salvors and pollution responders will be curtailed by sanctions legislation, and the insurers of the ship will likely have been unable to access commercial reinsurance markets commonly used to access the high levels of cover required to fully compensate victims.
Sanctioning individual ships is an effective way of addressing the Dark Fleet because shipping that trades internationally invariably needs access to western financial and service markets, which a designation deprives them of.
Collaboration with mainstream shipping
EU/G7 Coalition States to date have designated over 100 vessels, but in practical terms, the Dark Fleet is much larger than this – somewhere in the region 600 to 1000 vessels – so more needs to be done, says Salthouse. Thought also needs to be given as to how to dispose of old designated tonnage (as designation will prevent scrapping) whilst at the same time addressing the supply side so that designated ships cannot simply be replaced.
“That can only be achieved in collaboration with mainstream shipping which should be consulted and partner with governments to achieve their aim,” says Salthouse.
Majority of shipowners and service
Dark Fleet will thrive for so long as maritime sanctions are deployed by states as a means of foreign policy goals
Without concerted state action delving with the existing fleet and its access to new ships, the Dark Fleet will thrive for so long as maritime sanctions are deployed by states as a means of achieving their foreign policy goals.
The cost of compliance to mainstream shipping is huge. The vast majority of shipowners and service providers deploy significant resources to avoid inadvertently contravening applicable sanctions. EU/G7 Coalition partners should recognise that and work with the shipping industry to marginalise the commercial space served by the Parallel/Dark Fleet rather than simply imposing ever greater and more complex compliance requirements, comments Salthouse.
Use of EU/G7 Coalition service
In a majority of cases, the Parallel Fleet is not breaking any laws. With the exception of the UN sanctions programme directed at North Korea, the Parallel/Dark Fleet can trade perfectly lawfully.
For example, it is not illegal for a Russian flagged ship, insured in Russia, classed in Russia and trading with non-EU/G7 Coalition partners to transport Russian oil sold above the price cap through international waters to non-EU/G7 Coalition states provided the trade does not make use of EU/G7 Coalition service providers.
Use of established service providers
The Parallel/Dark Fleet is bad for shipping and undermines EU/G7, and on occasions, UN sanctions programmes, says Salthouse. States cannot control a trade when the ships carrying the cargoes and the service providers involved are not subject to the jurisdiction of that State.
Similarly, when ships sink and cause pollution, the whole shipping industry suffers by association, and the additional complexities involved in responding to a casualty that cannot make use of established service providers could make a bad situation much worse.
