A straightforward understanding of sanctioning would suggest that when Actor A imposes sanctions on Actor B, those who intend to conduct business with or via Actor A cease commercial dealings with Actor B- end of story. But while such a dynamic is representative of a successful sanctioning effort, this way of thinking also rests on a flawed and outdated assumption of actor B accepting their fate with limited resistance against actor A, or with no resistance at all. But reality shows us that Actor B does have agency. This article aims to take a closer look at that agency.
In practice, nation-state actors such as Iran and Russia have attempted (and have proven at least partly successful) in evading sanctions imposed by Washington and its allies. A clear example of this is the Shadow Fleet.
What is it?
The so-called 'Shadow Fleet' is a large network of oil tankers designed to circumvent international sanctions. This fleet operates in a grey area of maritime law, exploiting loopholes and employing various tactics to evade detection and continue the trade of sanctioned goods, such as petroleum. Shadow Fleet vessels are thus characterised by their deliberate opacity. They often fly flags of convenience, registering under jurisdictions with lax regulations to obscure their true ownership and origin.
And as you might guess, the members of this network also do not always play by established rules. A key tactic employed by these ships is AIS disabling. By "going dark," these tankers effectively vanish from conventional tracking systems, disrupting data transmission on a vessel’s identity, position and course. A successful way of overcoming this limitation is through the use of satellite data, as highlighted below in an investigation carried out by Bloomberg in the South China Sea.
Ownership structures of Shadow Fleet vessels are also intentionally opaque. Many lack identifiable ultimate beneficial owners, or provide only dubious contact details, often routing inquiries to anonymous mailboxes in offshore jurisdictions. This deliberate obfuscation makes it challenging for authorities to pinpoint responsible parties or enforce sanctioning regimes.
The fleet primarily consists of aging, second-hand vessels, many of which are operating past their intended scrapping dates. Operating outside standard maritime insurance frameworks, these ships navigate international waters with little oversight, facilitating the covert transfer of sanctioned oil through ship-to-ship transfers beyond the reach of national and international watchdogs.
Why it Matters
Sanctions are a powerful tool in any government’s arsenal, designed to influence outcomes based on a strategic foreign policy agenda. Debates about the effectiveness of sanctions often feel as old as sanctions themselves.
The Shadow Fleet underscores both sides of the debate: In November 2024, the Congressional Research Service highlighted that techniques used by Tehran to obscure its petroleum exports have complicated effective sanctioning. At the same time, while evading oil sanctions has generated substantial revenue over the last few years, it also comes at considerable risk, has its limitations, and has imposed significant costs on those who decide to circumvent sanctions, or who are caught doing business with sanctioned entities.
It is important to note that despite the presence of sanctions, the trade in sanctioned oil has surged since 2022. This is in part due to limitations imposed on Russia following its invasion of Ukraine, as well as re-imposed sanctions on Iran by the first Trump Administration, in May 2018. Based on these developments, Russia's reliance on this armada of covert oil tankers has grown at a record scale, with some estimates suggesting that 80% of Moscow’s petroleum exports now occur there, outside of the purview of watchful eyes. This tactic has now been utilised on a global scale, by Russia in the Baltic Sea and by Iran in the South China Sea.
While restrictions caused an initial downturn in oil exports for both Moscow and Tehran, both have found alternative routes to trade-based oil revenue. The use of an aging fleet of oil tankers is also relatively cost-efficient. Using the metaphor of a game of geopolitical whack-a-mole, it is much more cumbersome for the whacker to hold the hammer than for the mole to disappear underground and pop up in a new hole. As a result, use of shadow tankers has proven to be a highly effective way of obfuscating increasingly covert export regimes.
Nor are other global players always incentivised to impose hard compliance on Western sanctioning regimes, as crude from oil-rich jurisdictions such as Venezuela, Russia and Iran remains a finite resource in a world of seemingly infinite demand.
The South China Sea
China does not recognise US sanctions on Iran, phrased as “unilateral sanctions”, and maintains that all its trade with Iran is legal. Existing analysis paints a convoluted picture of their relationship. Some assessments hold that China remains the largest buyer of Iran’s oil. At the same time, Beijing’s trade relationship with Tehran has clearly not been without hiccups, exemplified by China’s recent import-ban on sanctioned oil vessels in the Shandong Port in January 2025 and Tehran’s price demand in January of last year. That said, Beijing's import of Malaysian oil -more than the country can even produce- has skyrocketed, prompting an investigation by Bloomberg Media.
Through examination of satellite imagery from 2020 to 2024, Bloomberg’s investigation found a near doubling in the number of vessels seen in ship-to-ship transfers off the coast of Malaysia. While not illegal, this metric serves as a useful indicator for vessels engaging in the trade of sanctioned oil.
While the above analysis may suggest that this is a foolproof way of evading sanctions and generating oil-based revenue covertly, this is not the full picture. A lack of insurance and overt ownership may lead to a diversion of responsibilities, especially when things go south.
This was showcased in May 2023, when the Pablo, a Shadow Fleet oil tanker flying the Gabonese flag, caught fire, killing three crew members after offloading its cargo in China. Subsequently, oil began to wash ashore hundreds of miles away in Indonesia, suspected of coming from the wreck of the Pablo and bringing obvious risks to climate security, marine life and ecological diversity.
In February 2025, the US Office of Foreign Asset Control (OFAC), sanctioned a network of entities involved in the smuggling of Iranian oil on behalf of Iran’s Armed Forces General Staff and its sanctioned front organisation, the Sepehr Energy Company. This action includes entities and individuals in multiple jurisdictions, including Shanghai-based Lucky Ocean Shipping Limited, as well as entities in India and the UAE, highlighting its international nature.
Risk Outlook
The proliferation of shadow fleets presents a complex set of challenges and risks for various stakeholders in the global oil trade and maritime security landscape.
The imposers, primarily Western governments, face significant challenges in enforcement. The adaptability and ingenuity of shadow fleet operators make it increasingly difficult to maintain the integrity of sanction regimes. For the evader, the short-term emphasis of continued oil exports does not come without risks. The case of the Pablo incident serves as a stark reminder of the human and environmental costs involved. Additionally, the recent OFAC sanctions highlight the potential for negative financial and reputational externalities.
Looking ahead, the cat-and-mouse game between sanction imposers and evaders is likely to intensify. We may see increased investment in technologies to track and identify shadow fleet activities, for enhancing supply chain transparency. Conversely, those operating shadow fleets may develop more sophisticated methods of evasion, possibly leveraging emerging technologies like autonomous vessels or advanced spoofing techniques.
For businesses engaged in legitimate oil trade, the shadow fleet phenomenon creates unfair competition and market distortions. Companies adhering to international sanctions may find themselves at a disadvantage against those willing to engage with these clandestine networks, potentially incentivising them to play outside of the rules themselves.
So, while shadow fleets currently offer a lifeline to sanctioned entities, the associated risks are also substantial and growing. As detection and enforcement capabilities improve, its long-term viability remains uncertain, potentially forcing a recalibration of the imposer’s policies, the evader’s tactics and the shadow fleet that sits in-between.