Tracking Russia’s ‘shadow fleet’
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It's a very cold morning in northern Bosphorus. I'm very close to the Black Sea. Yorick Eshek is looking out across the Bosphorus Strait, the waterway that separates Europe and Asia in Istanbul. I'm from Istanbul, and I currently live in downtown Istanbul by the Bosphorus, which is one of the world's busiest waterways. And the reason Yorick's been hanging out around here is because he's a ship spotter. He's been helping the FT investigate Russia's so-called Shadow Fleet —

On this particularly blustery morning, he's armed with a camera, trying to spot a ship called Swift Sea Rider. And I'm hoping to see Swift Sea Rider today, but the traffic slowed down due to rough weather. Swift Sea Rider changed names several times and changed flag since the Russian war on Ukraine started.

And now I'm further interested with Swift Sea Rider because it's one of the dark fleet vessels identified by Financial Times. York's talking about the ships that are helping Moscow circumvent sanctions that Western governments put on the country's oil exports. These sanctions were put in place after Russian President Vladimir Putin launched a full-scale invasion of Ukraine three years ago.

From the banks of the Bosphorus, Yorick in Istanbul can see these vessels sailing past him. And yet, little is known about who owns these ships, how they were acquired, or who oversees their operations. That's made the West's ability to restrict these vessels incredibly difficult. But recently, the FT's senior energy correspondent, Tom Wilson, lifted that veil of secrecy for the first time.

So I started looking for anybody involved in the sector who could tell me about some of these purchases, looking for any documents that would demonstrate who had bought these vessels and how they'd been funded. I think understanding how the Shadow Fleet operates and functions is incredibly important because the existence of the Shadow Fleet is worth billions of dollars a year to the Kremlin in additional revenue, which in turn is used to fund the war in Ukraine. I'm Michaela Tendera from the Financial Times.

As world leaders try to figure out how to bring an end to the war in Ukraine, Russia's shadow fleet continues to grow. So today on Behind the Money, how the FT shed light on Russia's shadow fleet. To understand the rise of this shadow fleet, it's important to first understand how global oil shipping worked before Russia invaded Ukraine three years ago. Here's Tom again.

So before Russia's invasion of Ukraine, Russia, like the rest of the world, really relied on European oil tankers to move its crude and refined petroleum products around the world. European ship owners, particularly the Greeks, really dominated that sector. And Western insurance providers at the time were underwriting something like 95% of the global shipping industry.

But that all changed in late 2022. That was when Western countries decided to punish Russia for its aggression against Ukraine by targeting one of the country's most important exports, oil. So rather than send soldiers to Ukraine, they really coalesced around a strategy that sought to try and restrict the amount of money that the Kremlin could make by selling its oil, which they thought would in turn reduce the Kremlin's finances and therefore its ability to fund the war.

So the way Western governments decided to handle this was to set something called a price cap. Rather than saying that Russia had to stop selling oil altogether, which could have led to a spike in global prices, they said Russia could only sell their oil at a max amount of $60 a barrel, way below market prices. This meant if Russia wanted to keep charging a market rate for oil, it couldn't use Western ships.

They started to build access to their own fleet of vessels in what became known as the Shadow Fleet. The point of the Shadow Fleet? To dodge the $60 price cap. So, Tom, this price cap went into effect officially in December of 2022.

When did you first have an inkling that this shadow fleet was being used as a way for Russia to dodge these oil restrictions? So then the first indication that shipping brokers and shipping analysts had that something was going on was the sudden increase in the price of secondhand tankers.

So most tankers have a lifespan of around 20 years. And from about 15 years onwards, owners are often thinking about whether they can scrap their tankers. But what we saw in the latter months of 2022 was suddenly the secondhand tanker market exploding and the prices being paid for old tankers suddenly went through the roof.

Tom spoke with brokers who were seeing nearly 20-year-old tankers sell for millions of dollars more than they would have been worth otherwise. But here's the thing. They were going to owners that were effectively impossible to trace. That's because these new owners were companies incorporated in offshore jurisdictions. There were some clues, though.

You could track these old ships with mysterious owners and see that their new routes focused around one place of origin. So a vessel that previously may have spent its days plying trade all over the world, moving oil between all different kinds of countries, suddenly it just starts to go from Russia to China or from Russia to India and then back again to Russia. Every commercial ship has a tracking device that you can use to see its route and its location, which is how Tom was able to do this.

He estimates that by the middle of last year, about 400 Shadow Fleet vessels were moving 4 million barrels of oil a day in this way. To be clear, that's about two-thirds of Russia's total oil exports. A massive amount. So last spring, Tom had a breakthrough.

he got a bit closer to understanding who might be behind some of these Shadow Fleet vessels. I'd been following the expansion of this Shadow Fleet for several months, but it was still unclear to me who owned any of these vessels. And then last year, a source came forward and pointed me towards a particular Shadow Fleet ship, a tanker called the Canis Power.

Now, this ship, the Canis Power, had broken down in the Danish Straits in May of 2023. It had an engine problem. It had sat there idling in the sea for six hours. And this had alarmed the Danish Coast Guard at the time and other people watching that shipping lane. And what the source told me, they actually knew who owned that ship. The name of the person who bought the ships was a man named John Ormerod.

Tom, who is John Ormerod? So Ormerod had almost no public profile before the FT's investigation. He's a chartered accountant. He was educated at Eton, one of Britain's most prestigious public schools, and later went into the shipping industry and then eventually set up his own financial advisory company in 1990. And since then, he's been well known in London's close-knit shipping industry as a ship financier.

What Tom learned is that John Ormerod set up these companies, sometimes known as special purpose vehicles, in the Marshall Islands. You know, the collection of islands way out in the Pacific Ocean. These companies, or special purpose vehicles, owned 25 of the Shadow Fleet tankers. And Tom learned that Ormerod had spent huge sums of money acquiring them.

The ships combined cost more than $700 million. But where had the money come from? The paper trail effectively identified that Ormerod had used special purpose vehicles to buy the vessels and that he'd used money from Lukoil's shipping arm, a company called Iger Shipping based in Dubai, to fund the acquisitions. Lukoil, the company Tom mentioned, is Russia's second largest oil producer.

And what Tom found through that tracking data we talked about was that Ormrod's 25 ships were moving oil almost exclusively for the company.

And what's more, Tom found a series of contracts that these ships had with Iger Shipping, an arm of luke oil based in Dubai. And what we identified was a series of charter agreements, which were specific contracts through which Iger Shipping had paid Ormerod to rent the vessels from him for two years and paid up front for those rentals.

And what was interesting about the charter agreements was that very often the amount of money that Iger Shipping was paying to rent the vessels for two years was exactly the same amount of money that Ormerod had handed over to buy the ships in the first place. In other words, Luke Oil was fronting money to Ormerod through its Dubai entity using a rental contract. So Ormerod was the person who'd bought the ships, but he didn't appear to be managing the vessels.

Other companies seem to be doing that. And this is where an individual called Tahir Lakhani enters the fray. Now, Lakhani has known Mr. Omrod for at least 40 years. The two men are close friends. Lakhani is also a British citizen, but he was born in Pakistan and is currently based in Dubai. He's made most of his money as a ship scrapping.

scrap dealer so he would generally buy old tankers and then scrap them but what the documents that we were able to review indicated is that in terms of these 25 vessels acquired by Mr. Ormerod on behalf of Lecoil

It seemed that Lakhani had been involved in setting up companies to then help manage those vessels. And what that means is provide crew, hire captains, and provide maintenance services that support the vessels as they plow back and forth between Russia and the oil markets in Asia. A picture was coming together for Tom. John Ormerod bought the vessels for Lukoil. Tahir Lakhani appeared to be helping to manage them.

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So, Tom, did John Ormerod or Tahir Lakhani break any laws by helping Russia to buy and manage these vessels? We didn't identify any clear evidence that they'd broken any laws. Neither Lukoil nor IGA Shipping are sanctioned entities, so it was still permitted to do business with them.

However, it was also clear that the structures that Ormerod and we believe Mr. Lakhani set up on Iger's behalf were done so specifically to enable these ships to operate outside of the price cap. Just remind us, the price cap basically means that if the ship's Western-owned or relies on Western insurance, then it has to comply with the rules and therefore move Russian oil at $60 or less a barrel. Is that right? Yeah, that's right. This whole structure was designed to circumvent those rules.

by incorporating companies outside of G7 countries and not using Western services so that they could then move oil above the cap and do so without breaking any laws. Lacanis told the FT that he has not had any involvement in the Dark Fleet or its activities, and he has not facilitated the breach of any sanctions. Luke Oil did not respond to a request for comment.

A parent company for Iger Shipping said that it conducted its operations, quote, in strict compliance with all relevant laws, end quote. Ormerod's lawyers told the FT he was assisting Luke Oil Shipping with legitimate business and that he undertook, quote, extensive due diligence, end quote, to establish that the proposed purchases would not violate any sanctions.

Other shipbrokers told Tom that the only credible reason for his involvement was to mask the ship's true owners. Interestingly, Ormerod didn't actually own these vessels for that long. The documents that we were able to obtain showed that in at least 14 of the vessels, he divested his ownership of the companies involved within about six months and transferred them actually to an individual who we were later able to link to his old friend, Lacani.

And then Ormrod's lawyers told us that he'd actually ended his involvement with the entire fleet and divested his shares in all 25 of the vessels by September of 2023. So, Tom, as you say, Ormrod kind of washed his hands of these ships in September of 2023. What's happened to them since then? Well, around that time, Western governments were starting to get more concerned about the Shadow Fleet and actually began issuing targeted sanctions against individual vessels.

And as a consequence, 17 of those 25 vessels originally acquired by Ormrod have now been added to either EU or UK sanctions lists. Since the start of the war, the West has really been playing a game of cat and mouse with Russia, whereby the West would bring in sanctions, and then Russia and its collaborators would set up new systems to go around those sanctions.

But it's almost too hard for those Western countries to keep up with the expansion of the Shadow Fleet. So they might sanction 30 vessels one day, and then over the following month, Russia will acquire another 30 vessels, and the game continues.

This is also why you'll see the Shadow Fleet ships get renamed and repainted. Because even if a vessel's on the sanctions list, it becomes more difficult to enforce those sanctions if it's harder to identify the ship. Finally, 280 meters. Suez Max tanker is just passing in front of me. And, uh...

Swift Sea Rider is, without even knowing, fits the Dark Fleet criteria. It's a 17-year-old tanker. And it changed names, flag. It's hosting currently a convenience flag. Just by the visual observation, it looks fully laden. Yorick Eshek, our ship spotter over in Istanbul, told me that he continues to see this happen on the Bosphorus.

They constantly change names. And some of them, I have ridiculous examples that the, you know, the paint wasn't applied correctly. So you still see the old name still very clearly. They change the letter F to E or something, you know, like they only painted little parts. They only changed like one letter from the previous name.

And they change the port, they paint it over, they change flag. You know, I will try to take pictures of this so we can see and compare to the previous transit. Nearly all of Russia's tankers will pass through the Bosphorus on their way out of the Black Sea and onto wherever they're delivering the oil. But York's also able to get the kind of data that only in-person observation can get you.

He can tell how heavy a ship is by looking at the water line that it sits at. He can compare those before and after ships come in to tell if it picked up some cargo, say Russian oil, or offloaded some.

You know, shipping industry is really one of the world's last great mysteries in a way. You know, the air travel, air freight, et cetera, is so much more heavily regulated. But ships come and go to different ports and they carry container cargoes that is not necessarily visible from outside. And there's been constantly new subjects to follow. Back in London, Tom hasn't stopped tracking the shadow fleet.

In part because the money it's making continues to fund Russia's war in Ukraine. We could certainly say that the Shadow Fleet has meant billions of dollars in additional revenue to the Russian state every month, which it can use to help fund the war. But there are other concerns, too. Some recent incidents suggested that the Shadow Fleet could be doing a lot more than just dodging the oil price cap.

it might be taking a more active part in Russia's war efforts. There's been a couple of really interesting recent developments. One around Christmas time, where a vessel believed to be part of the Shadow Fleet and moving Russian oil was stopped by Finnish authorities and accused of dragging its anchor in an attempt to sabotage undersea cables. In another, there have been really interesting shipping media reports about Shadow Fleet vessels moving

allegedly having listening devices placed on boards, which Russia appears to have used to try and eavesdrop on Western communications while these vessels move through the Baltic. And that's a fascinating development. I think Western intelligence agencies are

Beyond these alleged military movements, regulators in Europe also have environmental worries about these ships that are pretty old. So...

What regulators are worried about is that if a Shadow Fleet vessel has an accident and spills its oil into the sea, that those insurance providers will not have the capital to actually pay out. And then it becomes a question of who's going to cover the costs? Who's going to pay for the massive cleanup costs that occur when a million barrels of oil spills out into the ocean? Tom, we're talking at a time where things are changing a lot in regard to Ukraine. Yeah.

There's talk about normalizing trade relations between Russia and the rest of the world, though it's also clear that U.S. President Donald Trump is more eager for this than many European leaders. So what do you think is going to happen next with the sanctions? And by extension, what happens to the shadow fleet?

So it's no surprise that the Trump factor has made this incredibly unpredictable. I mean, it certainly seems possible if you look at Trump's posturing that he could push for a rollback of some of these sanctions policies. I think at the moment, both the EU and the UK are committed to continuing the implementation of these policies, including the price gap. And recently, we've seen the UK roll out its biggest ever sanctions package against Shadow Fleet tankers.

So I don't think we're going to see a change in the policy overnight. But I think almost more interestingly is even if the West got together and decided, okay, let's abandon the price cap and let's stop targeting these vessels with sanctions. I think the bigger point here is that as a consequence of the policies of the last few years, the West has inadvertently created or enlarged the shadow fleet to its current size of over 400 vessels.

And it will struggle to exercise any control over that fleet going forward. Tom says that if or when restrictions are lifted, Russia might not want to go back to using European insurers and shipping companies anyway. And whether it does or not, the fleet will likely find other shadowy uses, like carrying sanctioned oil from Iran and Venezuela.

What are you most concerned about at the moment or what are you watching most closely just in your role on this beat as things are changing so much? I mean, I think we are certainly trying to predict, like everybody else, is where these Trump interactions with Russia and Ukraine end. I mean, we're already hearing whispers that Trump officials are starting to talk to energy companies about going back to Russia.

But I mean, it's really incredibly premature to have those types of conversations. And the executives that are being asked that question are incredibly nervous. And so it's a really unpredictable time where it's almost impossible to say what the West's relationship with Russia is going to look like by this time next year. Behind the Money is hosted by me, Michaela Tendera. This episode was produced by me, Misha Frankl-Duval, and Katya Kamkova.

Sound design and mixing by Sam Giovinko and Joseph Salcedo. Original music is by Hannes Braun. Special thanks to Dan Stewart. Topher Forges and Manuela Saragosa are our executive producers. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.

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