Skuld CEO Ståle Hansen has called on Western sanction authorities to address shipping industry concerns over the growth of shadow fleet, which includes hundreds of tankers lacking proper insurance and maintenance.

Russia, Iran and Venezuela, faced with tightening G7 and EU sanctions, have been acquiring vintage ships to transport their oil in recent years, many of which would lose access to maritime service firms after being identified by Western governments.

“What happens in practice is that we have a large and growing fleet which is not insured by any of the Western insurance companies,” said Hansen, whose Norway-based company is part of the International Group of Protection and Indemnity Clubs that provide third-party liability coverage to most of the world’s ocean-going fleet.

“None of the P&I clubs are in contact with these vessels,” Hansen said in a recent interview with Platts, part of S&P Global Commodity Insights.

A recent study by Commodity Insights and S&P Global Market Intelligence has found 940 crude and product were confirmed by Western authorities to have violated sanctions or at high risk of breaching them as of May, of which 82% did not have P&I coverage.

This was up from their previous estimate the shadow fleet size at 591 tankers in April 2024, of which 60% lacked such insurance.

“The biggest concern we have, and I think many of [the] shipowners have as well, is that you get sort of this parallel system for trade… [with] substandard vessels sailing without proper insurance,” Hansen said.

“And that means that the sanctions are not really working as they should.”

Counter measures

The CEO said Western governments should “learn about the potential consequences of the current sanction regimes” and seek to ensure that “at least that vessels trading in the oceans have a proper insurance cover in place.”

“It’s important that the authorities are listening to the industry,” said Hansen, adding that shadow fleet tankers should also have the same safety regulations and insurance standards as mainstream ships.

Northwest European countries have tightened their inspections over the insurance coverage of tankers with Russian oil sailing through Baltic sea lanes, crucial for the OPEC+ member as over one-third of its crude and oil products flow through them.

Several shadow fleet tankers were detained by EU member states earlier this year, partly due to tighter scrutiny. In May, Russia responded to Estonia’s attempt to inspect a sanctioned tanker by sending fighter jets to accompany the ship, with one aircraft breaching Estonian airspace.

Safety incidents and oil spills involving uninsured tankers could leave the coastal states to foot the bill, and salvage companies could be slow in their response to such incidents due to fears over breaching sanctions.

Sanction policies

Skuld was one of the largest P&I cover providers to Sovcomflot, but the contracts were terminated because the Russian state carrier was sanctioned by Western governments after Russia invaded Ukraine in February 2022.

The insurer, as part of due diligence, requires its existing customers to declare their Russian tanker businesses and have mandatory sanction checks for any new customers.

“It’s very few that we need to actually get this information from, because most of our tanker owners are not trading with Russia,” Hansen said.

To stay compliant, Skuld has also regularly followed governments’ sanction enforcement and used artificial intelligence to track its clients’ trading patterns, but Hansen suggested the club would not go beyond what’s legally required.

“If we are starting to self-sanction based on sort of a corporate view, things would become very complicated for us,” the CEO said.

“We at all times should follow any sanctions, any regulation and be in compliance, but to go further than that is very difficult.”
Source: Platts