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14 June, 2024
 
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How Russia defies sanctions with its secret gas fleet

Inside the shadow fleet evading rules to keep Russian gas flowing

Newsroom

Moscow's response to Western sanctions on the Russian gas industry has revealed a strategic shift in its approach, with the creation of a 'shadow fleet' of liquefied natural gas (LNG) carriers. These vessels, owned by Russian shipping companies but flagged by countries not imposing sanctions on Russia, serve as a workaround to continue exporting gas globally. This move, sanctioned by Putin, underscores Russia's determination to mitigate the economic repercussions of sanctions while maintaining its influence in the global energy market.

According to an article by Andreas Karamitas in Oikonomiki, the emergence of this shadow fleet comes amidst concerns over environmental and safety risks associated with the vessels. Unlike conventional LNG carriers, which adhere to stringent maritime regulations and environmental standards, the ships in Russia's shadow fleet operate with rudimentary insurance coverage, posing significant financial and environmental risks in the event of accidents or leakages.

One key player facilitating the operation of Russia's shadow fleet is Ingosstrakh, a Moscow-based marine insurance company. While Ingosstrakh provides essential insurance coverage for the transportation of Russian fuel, contracts with shipping companies contain clauses that effectively render any claims by shipowners handling Russian oil unfeasible. This arrangement, while advantageous for Russia's economic interests, raises alarm bells among industry analysts and environmental advocates.

Moreover, the consequences of Russia's reliance on the shadow fleet extend beyond economic considerations. The increased demand for LNG ships, partly driven by the shift away from Russian gas due to sanctions, has led to a rise in freight rates. This, in turn, has contributed to higher LNG prices on the global market, impacting energy security and affordability for importing countries.

Despite these concerns, Russia's shadow fleet affords it significant geopolitical leverage, allowing the country to exert pressure on other nations while maintaining its foothold in the global LNG market. However, the ramifications of this strategy are multifaceted and complex, with potential long-term implications for global energy dynamics and climate change mitigation efforts.

As European officials contemplate additional measures to address Russia's shadow fleet activities, the need for comprehensive policies to ensure energy security and combat climate change becomes increasingly urgent. The findings of this report, covered extensively by major news outlets such as the Financial Times and the Danish Danwatch, underscore the critical importance of proactive measures to mitigate the environmental, economic, and geopolitical risks posed by Russia's shadow fleet operations.

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Cyprus  |  Russia  |  shipping  |  environment

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