How sanctioned oil travels the world through shadow fleets and fake flags

Recent Indian and US mid-sea operations have exposed a hidden system that allows sanctioned oil to bypass global restrictions through shadow tankers, false flags and offshore transfers

On February 6, the Indian Coast Guard said it intercepted three vessels about 100 nautical miles west of Mumbai in a coordinated sea-air operation, busting an international oil-smuggling racket operating in international waters. Officials said the syndicate used mid-sea transfers to move cheap oil from conflict-ridden regions onto motor tankers, thus evading duties owed to coastal states. The ships are being escorted to Mumbai for legal action.

 

The case has brought to light how illegal and sanctioned oil continues to move across global seas via a shadow system of tankers, false flags and mid-ocean transfers that has expanded sharply in recent years as sanctions enforcement on nations such as Russia and Iran has tightened.

 

How is illegal or sanctioned oil moved across the seas?

While oil under international sanctions cannot move openly through global markets, it travels through a parallel maritime system built to hide its origin, ownership and destination. This system relies on ageing oil tankers, complex ownership structures, false identities and mid-sea transfers that allow cargoes to change hands away from port checks or customs authorities.

What does it mean when oil is “sanctioned”?

Sanctioned oil refers to crude or refined petroleum products whose sale or transport is restricted by governments or international blocs, usually as a tool of foreign policy. The United States and the European Union have imposed sanctions on oil exports from countries such as Iran, Venezuela and Russia, aiming to cut off revenue streams linked to war, terrorism or human rights abuses. 

When oil is sanctioned, vessels carrying it are denied port entry, insurance coverage and access to international banking systems. In some cases, ships themselves are designated for sanctions, making any interaction with them illegal for compliant firms. As a result, operators turn to a shadow economy to bypass these restrictions.  ALSO READ | Russia's secret oil ships: How shadow tankers evade the West's watch

How do shadow tankers move sanctioned oil?

To evade sanctions, operators rely on what shipping analysts call the “shadow fleet” or “ghost fleet”. These tankers deliberately operate outside normal maritime transparency. 

Such vessels often change their names, flags and registered owners frequently, sometimes flying false flags or broadcasting fake identities. They may switch off their automatic identification system (AIS) transponders, a practice known as “going dark”, or spoof their locations to appear thousands of miles away from where they actually are. 

Another common tactic is ship-to-ship transfers in international waters. Oil is moved from one tanker to another at sea, allowing the cargo to be mixed, relabelled or routed through multiple vessels before reaching a buyer. By the time it enters a port, its origin is difficult to prove. 

Because many shadow tankers lack credible insurance, they are often barred from mainstream ports, reinforcing their dependence on offshore transfers and informal logistics chains.

How large is the shadow tanker fleet?

There is no precise count, largely because the system is designed to evade measurement by operating in the shadows. However, shipping and energy experts cited by The New York Times estimate that shadow tankers may account for as much as 20 per cent of the global oil tanker fleet. 

This number has grown sharply since 2022, after sanctions were expanded following Russia’s invasion of Ukraine. According to an S&P Global report, the fleet grew by about 45 per cent between May 2024 and May 2025. The report added that Panama is currently the single largest flag state for the shadow fleet, accounting for 22 per cent of its vessels.

What has the United States done in the Caribbean?

In December last year, US authorities seized two oil tankers in the Caribbean accused of transporting sanctioned crude. One of them, later identified as the Marinera, had previously operated under the name Bella 1, reported The New York Times. US officials said the vessel had a history of carrying Iranian oil allegedly sold to finance terrorism. 

During pursuit, the ship repeatedly changed its identity, went dark and even painted a Russian flag on its hull in an apparent attempt to deter seizure. Despite this, US forces reportedly intercepted the tanker in waters between Iceland and Scotland. 

The second tanker, the M Sophia, was described by the US military as a stateless, sanctioned dark fleet vessel engaged in illicit activity. According to shipping data firms Kpler and TankerTrackers.com, as cited by The New York Times, it was carrying between 1.8 and two million barrels of Venezuelan crude. The ship had previously spoofed its location signals to disguise movements near Venezuela and had transported oil linked to Venezuela, Iran and Russia.

Why are some shadow tankers now flying Russian flags?

A notable shift in recent months has been the decision by several shadow tankers to register under the Russian flag, which maritime analysts see as a form of deterrence rather than an effort to gain legitimacy. 

According to S&P Global, dozens of tankers switched to Russian registration since mid-2024. This followed an earlier incident in which Russian military aircraft intervened when Estonian authorities attempted to stop a tanker in the Baltic Sea, signalling that Moscow may be willing to protect vessels flying under its banner near its waters.

Why does this matter beyond oil markets?

Industry analysts say shadow tanker operations pose risks beyond sanctions evasion. Poorly maintained vessels operating without insurance raise the risk of environmental disasters. The practice also blurs legal norms at sea, creating uncertainty about enforcement, particularly when state power is used to shield illicit shipping. 

As countries tighten oversight, the shadow fleet is adapting by changing flags, routes and tactics. What is emerging is a contested maritime space where energy, security and geopolitics increasingly collide.