Sanctions and Shadow Fleet

The “Shadow Fleet”expands continuously in the International Tanker Market.Meanwhile, the problem of dismantling sanctioned ships has become increasingly prominent,causing the industry to have deep concerns about safety and environmental risks.

A large number of old age oil tankers are stranded at sea for a long time because they are unable to access compliant dismantling channels, causing serious challenges to shipping safety, market order and environmental protection goals.

Ⅰ.Sanctioned ship dismantling transactions are hidden and high-risk

According to shipbroker data, 15 shadow fleet tankers have been dismantled since 2024 and there were 8 sanctioned vessels among them. However, these transactions were conducted in atypical, confidential ways: extremely easy  contract terms, long credit  payment period,lack of standard guarantees. Settlement often avoids US dollar system and uses non-mainstream currencies, causing a significant discount in seller benefit. Most ship-breaking yards are non-compliant companies that don’t comply with the Hong Kong Convention. Although they have not been prosecuted yet, they face the risk of retroactive enforcement in the future.

Ⅱ.Shadow fleet capacity surges,while sanctions % increased sharply

Until August 2024,the shadow fleet scope has reached 1,140 vessels, totaling load of 127 million weight tons, an increase of over 20% since the beginning of the year. These ships are lack of insurance and standardized inspections, which is not only drives down premiums and freight rates, disrupts the market, but also increaee the risk of collisions and oil spills due to lack of maintenance.At the same time, the number of sanctioned tankers has soared to 886 from 191 a year ago.

Ⅲ.Shadow fleet will become a stubborn industry problem

The international world has not yet established a safe and legal dismantling mechanism presently.Sanctioned ships face difficulties such as difficult of US dollar payments, joint liability risks and lack of compliant buyers.They are struggling in a dead cycle of "unable to operate and unable to dismantle".

Some non-compliant ship-breaking yards purchase ships at low prices through gray transactions and make profits through substandard operations, break up further green recycling standards and fair competition.Global tanker giant Frontline has warned that if a legal dismantling mechanism is not established as soon as possible, more than 1,500 "ghost tankers" may be stranded at sea in the future, posing both environmental and safety risks.

Ⅳ.Industry calls for international cooperation to break deadlock

Industry strongly calls on the International Maritime Organization (IMO) and the U.S. Office of Foreign Assets Control (OFAC) and other institutions to jointly design a safe and compliant ship exit mechanism, establish internationally recognized dismantling channels, resolve potential industry disasters, and safeguard the green transformation of the shipping industry.