This is an audio transcript of the Behind the Money podcast episode: ‘Tracking Russia’s “shadow fleet”’
Yörük Işık voice clip
It’s a very cold morning in northern Bosphorus. I’m very close to the Black Sea.
Michela Tindera
Yörük Işık is looking out across the Bosphorus strait, the waterway that separates Europe and Asia in Istanbul.
Yörük Işık voice clip
I’m from Istanbul, and I currently live in downtown Istanbul by the Bosphorus, which is one of world’s busiest waterways.
Michela Tindera
And the reason Yörük’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 Swiftsea Rider.
Yörük Işık voice clip
And I’m hoping to see Swiftsea Rider today. But the traffic slowed down due to rough weather and Swiftsea Rider changed names several times and changed flag since the Russian war on Ukraine has started. And now I’m further interested with Swiftsea Rider because it’s one of the “dark fleet” vessels identified by Financial Times.
Michela Tindera
Yörük is 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, Yörük 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.
Tom Wilson
So I started looking for anybody involved in the sector who could tell me about some of these purchases. I’m looking for any document 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.
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Michela Tindera
I’m Michela Tindera 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.
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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.
Tom Wilson
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. And European shipowners, particularly the Greeks, really dominated that sector and western insurance providers at the time were underwriting something like 95 per cent of the global shipping industry.
Michela Tindera
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.
Tom Wilson
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.
Michela Tindera
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.
Tom Wilson
They started to build access to their own fleets of vessels in what became known as the shadow fleet.
Michela Tindera
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?
Tom Wilson
Yeah. So well then the first indication that shipping brokers and shipping analysts had that something was going on was the sudden increase in the price of second-hand 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 second-hand tanker market exploding, and the prices being paid for old tankers suddenly went through the roof.
Michela Tindera
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.
Tom Wilson
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.
Michela Tindera
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 4mn 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.
Tom Wilson
I’ve 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, and 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 who were watching that shipping lane. And what the source told me, they actually knew who owned that ship.
Michela Tindera
The name of the person who had bought the ships was a man named John Ormerod. Tom, who is John Ormerod?
Tom Wilson
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.
Michela Tindera
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 $700mn. But where had the money come from?
Tom Wilson
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 Eiger Shipping, based in Dubai, to fund the acquisitions.
Michela Tindera
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 Ormerod’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 Eiger Shipping, an arm of Lukoil based in Dubai.
Tom Wilson
And what we identified was a series of charter agreements, which were specific contracts through which Eiger Shipping had paid Ormerod to rent the vessels from him for two years and paid upfront for those rentals. And what was interesting about the charter agreements was that very often the amount of money that Eiger 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.
Michela Tindera
In other words, Lukoil 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.
Tom Wilson
And this is where an individual called Tahir Lakhani enters the fray. Now Lakhani has known Mr Ormerod 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 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 Lukoil, (inaudible) 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 sort of support the vessels as they plough back and forth between Russia and the oil markets in Asia.
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Michela Tindera
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, you know, manage these vessels?
Tom Wilson
We didn’t identify any clear evidence that they’ve broken any laws. Neither Lukoil nor Eiger 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 Eiger’s behalf were done so specifically to enable these ships to operate outside of the price cap.
Michela Tindera
Just remind us, the price cap basically means that if the ship is 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?
Tom Wilson
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.
Michela Tindera
Lakhani has 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. Lukoil did not respond to a request for comment. A parent company for Eiger 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 Lukoil’s shipping with legitimate business and 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.
Tom Wilson
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 Lakhani. And then Ormerod’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.
Michela Tindera
So, Tom, as you say, Ormerod kind of washed his hands of these ships in September of 2023. What’s happened to them since then?
Tom Wilson
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 Ormerod have now been added to either EU or UK sanctions lists.
Since the start of the war, I mean, 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.
Michela Tindera
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.
Yörük Işık voice clip
Finally, a 280m Suezmax tanker is just passing in front of me. And Swiftsea Rider is, without even knowing, fits the dark fleet criteria. It’s a 17-year-old tanker and it changed names, flags, hoisting currently a convenience flag. Just by visual observation, it looks fully laden.
Michela Tindera
Yörük Işık, our ship spotter over in Istanbul, told me that he continues to see this happen on the Bosphorus.
Yörük Işık voice clip
They constantly change names. And some of them, I have ridiculous examples that they . . . you know, the paint wasn’t applied correctly so you still see the old names still very clearly. They change the letter F to E or something. You know, like they only painted little parts. They only change 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.
Michela Tindera
Nearly all of Russia’s tankers will pass through the Bosphorus on their way out of the Black Sea and on to wherever they’re delivering the oil. But Yörük is 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 waterline that it sits at. He can compare those before and after a ship’s come in to tell if it picked up some cargo, say, Russian oil, or offloaded some.
Yörük Işık voice clip
You know, shipping industry is really one of the world’s last great mysteries in a way. You know, the air travel, air freight, etc, 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.
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Michela Tindera
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.
Tom Wilson
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.
Michela Tindera
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.
Tom Wilson
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 allegedly having listening devices placed on board, 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. You know, I think western intelligence agencies were all very worried about the role these vessels had in moving oil, but I don’t think they’d considered until recently that Russia might even be weaponising the shadow fleet as an active part of the war effort.
Michela Tindera
Beyond these alleged military movements, regulators in Europe also have environmental worries about these ships that are pretty old.
Tom Wilson
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 clean-up costs that occur when a million barrels of oil spills out into the ocean?
Michela Tindera
Tom, we’re talking at a time where things are changing a lot in regard to Ukraine. There’s talk about normalising trade relations between Russia and the rest of the world, though it’s also clear that US 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?
Tom Wilson
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 cap. 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, OK, 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.
Michela Tindera
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?
Tom Wilson
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 were 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.
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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. This episode was produced by me, Mischa Frankl-Duval and Katya Kumkova. Sound design and mixing by Sam Giovinco and Joseph Salcedo. Original music is by Hannis Brown. Special thanks to Dan Stewart. Topher Forhecz and Manuela Saragosa are our executive producers. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.
