SANCTIONS impose strict compliance from good shipowners while “the bad guys are going to carry on doing bad things”, Van Bael & Ellis partner Michelle Linderman has told an industry audience.

The lawyer’s comments came at the annual Lloyd’s List Outlook Forum held in London this morning, at a session entitled How Security Risks and Sanctions Have Divided Shipping.

Linderman also pointed to the inexperience of regulators in maritime and insurance matters, which can create unintended consequences, and warned that Ukraine might have to cave in to Russian aggression if Donald Trump pulls the funding plug on taking office.

Risk and compliance is central not only to safety in the shipping industry but to due diligence, Lloyd’s List editor-in-chief Richard Meade argued in his opening remarks.

However, shipowners need to ask themselves if they are really interested in transparency or simply seeking plausible deniability.

Meade predicted more sanctions in the year ahead, on account of shifts in the political situation. In particular, the intentions of US president-elect Trump are unpredictable.

Trump is likely to ramp up sanctions pressure on Iran, but his stance towards Russia remains unclear.

The result of the upsurge in sanctions is that while one part of the industry is jumping through hoops in order to comply, a new and substantially unregulated sector has emerged.

Michelle Wiese Bockmann, principal analyst at Lloyd’s List Intelligence, said that the *dark fleet of tankers skirting sanctions has now reached 667 vessels, or 14.5% of the world fleet. However, the growth in numbers is tapering.

The worrying thing is that many of them are without known insurance, leading to what she described as “a regulatory game of whack-a-mole” and a race to the bottom, with frequent changes of name and flag.

Some 131 dark fleet vessels are individually sanctioned, or 21% of the dark fleet as a whole. The UK has named 73 vessels, the US 39 as of earlier this week with the total increased since, and the EU 19. The EU is expected to name a further 50 tankers shortly.

The UK has expressly sanctioned three marine insurers. But their blue cards are still accepted in ports in countries purchasing Russian oil and products, particularly India and China.

Iran is still exporting 1.6m barrels per day, five years after the reimposition of sanctions.

Bridget Diakun, maritime risk analyst at Lloyd’s List Intelligence, highlighted the sharp fall in Red Sea transits since the Houthi onslaught on merchant tonnage commenced in November 2023.

Transits through the Bab el Mandeb are down 60% and through the Suez Canal 59% year on year, although transits round the Cape of Good Hope are up 60%.

No sector has been immune. But there has been a recent uptick in boxships using the Red Sea, with the expansion attributable to new services operated by Chinese owners on an opportunistic basis.

Linderman pointed out that maritime-related sanctions are being imposed not just by the UK, US and EU but also Japan, Australia, Singapore and other jurisdictions.

But the various sanctioning states do seem to be coming together on strategic policy objectives.

Sanctions work in certain ways, she contended. While they stop people in the West doing things, people involved in the dark fleet do not pay them any heed. “The bad guys are going to continue doing bad things,” she warned.

To add to the problem, many of those drafting the regulations have no hands-on experience of how shipping or marine insurance works. There are inevitably unintended consequences when the rules are not properly thought through.

There is little point in asking sanctioning entities for guidance in emergency situations, as replies sometimes take weeks or even months to arrive when rulings are needed immediately.

“I don’t think they intend there to be a lack of clarity, but there definitely is,” she said.

Russia has put a huge amount of effort into making the dark fleet viable, with the revenues raised from oil exports central to funding the invasion of Ukraine.

If Trump were to cut funding to Ukraine after taking office, that country would probably not be able to continue its resistance.

Daniel Martin, a partner at law firm HFW, said that sanctions risked splitting shipping into two bodies of trade.

This creates an opportunity for people in jurisdictions not bound to comply, while making life harder for everybody else.

Things have almost reached the US situation where everything is prohibited unless it is expressly permitted, he commented sardonically.

While transparency remains strong at the better end of the industry, the bottom end is becoming even less transparent than it traditionally has been.

But oil is a valuable commodity, and somebody will always be willing to buy it.

Mikolaj Stoma, data operations manager at Lloyd’s List Intelligence, said that Russia is restricting access to shareholder data.

“That lack of transparency is creeping in increasingly. It can take on many guises,” he warned.

Meade added that ultimate beneficial ownership is not always easy to establish, with registered owners often shell companies owned by shell companies.

* Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined in US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned.

Download our explainer on the different risk profiles of the dark fleet here 

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