The West has cracked the code on how to roll back Russia’s shadow fleet at scale. This gives policymakers new, low-risk, high-impact options for further restricting Moscow’s oil revenues.
An interesting piece, and the idea of the $15/bbl surcharge to go to a fund for Ukraine seems much better than any proposal to reduce oil output. That charge, however, to be collected by shippers, will continue to incentivize the shadow fleet. Alternatively, would it be possible to impose the surcharge on refiners; i.e., allow any refiner in the world to import Russian crude as long as it paid $15/bbl into a Ukraine reconstruction fund? This would eliminate the rationale for the non-seaworthy shadow tankers.
Enforcement of a penalty on refiners could be more complicated, but as noted by the quote from an Indian refiner, the prospect of being frozen out of financial markets could provide a compelling rationale. Moreover, despite the many problems of the current Administration's tariff policies, the President's threat to impose secondary tariffs on Russian oil could contain the kernel of a rationale policy. For example, if an Indian or Chinese refiner failed to pay the surcharge, complying countries could impose a secondary tariff on any oil product, petrochemical or plastic imported from those companies (or countries).
The West needs to incorporate the amount of war reparations, to be paid by Russia, into the negotiations to end this conflict. Iraq's reparations for the First Gulf War, paid through oil revenues, is a model.
The 46% reduction in shadow fleet capacity is significant, but the Hormuz crisis has introduced an irony nobody expected: the same sanctions-tolerant tanker infrastructure Russia built to circumvent price caps is now the only fleet still transiting the Strait. Half of all vessels moving through Hormuz in early March were shadow fleet ships. Moscow's parallel logistics system — built to evade Western enforcement — turns out to be the one network willing to accept the insurance and physical risks of a contested chokepoint. That's not a policy win for anyone. It means the barrels that do flow through Hormuz carry Russian, Iranian, or Venezuelan flags, and the commercial architecture around them is entirely outside Western visibility.
Solid forensic work on the fleet dynamics. But there's a piece of this that the sanctions enforcement community keeps underestimating — the Iran war just handed Moscow a reprieve that no amount of tanker sanctions can offset. Russia is now selling Urals above Brent in certain Indian markets. That's not a discount story anymore, that's a scarcity premium story. Indian refiners who spent 2023–2025 extracting every dollar of discount from sanctioned Russian barrels are now bidding up because their Gulf supply dropped from nearly 50% of imports to effectively zero. The shadow fleet may be shrinking, but Russia's per-barrel revenue has never been higher. The sanctions architecture was built for a world where Russian crude was a discount product. Right now it's a lifeline, priced accordingly.
Craig, this is one of the clearest explanations yet of where the leverage actually sits.
What stands out is not just the degradation of the shadow fleet, but the structural reality behind it: Russia never replaced the Western system—it tried to route around it. And that distinction is now decisive.
If exports are being pulled back into the mainstream fleet, then the centre of gravity shifts from evasion to control. Not at sea, but in insurance, finance, and access to markets.
That is where the real pressure lies—and where this war is increasingly being decided.
Russia didn’t replace the system. It tried to bypass it.
Now the shadow fleet is shrinking, and exports are flowing back into Western-controlled infrastructure.
Which means the leverage isn’t on the water—it’s in insurance, finance, and market access.
That’s where this war is really being fought.
The System Russia Could Not Escape.
The Return to the System:
Why Russia’s Oil Exports Are Becoming Controllable Again.
This was hugely helpful! I was trying to figure out why Canada - not a big buyer of Russian oil - putting another 100 shadow tankers on their sanction list made an impact on Russia's Ukraine war funding. You gave excellent information about the shadow fleet and Russia's oil production, and the reasons why big customers like India see sanctioned oil sources as risky.
Yes, the existing measures are having some effect and Russia’s revenues are declining but this is far from the level of impact that could bring about serious consequences. China and India will not stop buying cheap Russian crude and no real action is being taken against the shadow fleet that would radically change its use.
Thanks, great read, highly appreciated - but if I read you correctly, you would suggest to reduce the cap to 50USD or even 45USD? - Any specific proposals?
An interesting piece, and the idea of the $15/bbl surcharge to go to a fund for Ukraine seems much better than any proposal to reduce oil output. That charge, however, to be collected by shippers, will continue to incentivize the shadow fleet. Alternatively, would it be possible to impose the surcharge on refiners; i.e., allow any refiner in the world to import Russian crude as long as it paid $15/bbl into a Ukraine reconstruction fund? This would eliminate the rationale for the non-seaworthy shadow tankers.
Enforcement of a penalty on refiners could be more complicated, but as noted by the quote from an Indian refiner, the prospect of being frozen out of financial markets could provide a compelling rationale. Moreover, despite the many problems of the current Administration's tariff policies, the President's threat to impose secondary tariffs on Russian oil could contain the kernel of a rationale policy. For example, if an Indian or Chinese refiner failed to pay the surcharge, complying countries could impose a secondary tariff on any oil product, petrochemical or plastic imported from those companies (or countries).
The West needs to incorporate the amount of war reparations, to be paid by Russia, into the negotiations to end this conflict. Iraq's reparations for the First Gulf War, paid through oil revenues, is a model.
An excellent and extremely informative article! Thank you.
Excellent work, Craig, and a great read. Thank you.
The 46% reduction in shadow fleet capacity is significant, but the Hormuz crisis has introduced an irony nobody expected: the same sanctions-tolerant tanker infrastructure Russia built to circumvent price caps is now the only fleet still transiting the Strait. Half of all vessels moving through Hormuz in early March were shadow fleet ships. Moscow's parallel logistics system — built to evade Western enforcement — turns out to be the one network willing to accept the insurance and physical risks of a contested chokepoint. That's not a policy win for anyone. It means the barrels that do flow through Hormuz carry Russian, Iranian, or Venezuelan flags, and the commercial architecture around them is entirely outside Western visibility.
Solid forensic work on the fleet dynamics. But there's a piece of this that the sanctions enforcement community keeps underestimating — the Iran war just handed Moscow a reprieve that no amount of tanker sanctions can offset. Russia is now selling Urals above Brent in certain Indian markets. That's not a discount story anymore, that's a scarcity premium story. Indian refiners who spent 2023–2025 extracting every dollar of discount from sanctioned Russian barrels are now bidding up because their Gulf supply dropped from nearly 50% of imports to effectively zero. The shadow fleet may be shrinking, but Russia's per-barrel revenue has never been higher. The sanctions architecture was built for a world where Russian crude was a discount product. Right now it's a lifeline, priced accordingly.
Craig, this is one of the clearest explanations yet of where the leverage actually sits.
What stands out is not just the degradation of the shadow fleet, but the structural reality behind it: Russia never replaced the Western system—it tried to route around it. And that distinction is now decisive.
If exports are being pulled back into the mainstream fleet, then the centre of gravity shifts from evasion to control. Not at sea, but in insurance, finance, and access to markets.
That is where the real pressure lies—and where this war is increasingly being decided.
Russia didn’t replace the system. It tried to bypass it.
Now the shadow fleet is shrinking, and exports are flowing back into Western-controlled infrastructure.
Which means the leverage isn’t on the water—it’s in insurance, finance, and market access.
That’s where this war is really being fought.
The System Russia Could Not Escape.
The Return to the System:
Why Russia’s Oil Exports Are Becoming Controllable Again.
In my Quiet Front series I have connected to:
Shadow fleet attrition
Indian refiners’ risk aversion
Insurance (P&I clubs)
Dollar settlement + derivatives markets
Freight surcharge concept → funding Ukraine
This was hugely helpful! I was trying to figure out why Canada - not a big buyer of Russian oil - putting another 100 shadow tankers on their sanction list made an impact on Russia's Ukraine war funding. You gave excellent information about the shadow fleet and Russia's oil production, and the reasons why big customers like India see sanctioned oil sources as risky.
thanks for your sharing.
Yes, the existing measures are having some effect and Russia’s revenues are declining but this is far from the level of impact that could bring about serious consequences. China and India will not stop buying cheap Russian crude and no real action is being taken against the shadow fleet that would radically change its use.
Excellent work, this deserves to be read and shared widely
Thanks, great read, highly appreciated - but if I read you correctly, you would suggest to reduce the cap to 50USD or even 45USD? - Any specific proposals?