Shadow Fleet Volume, Challenges Expected to Grow, WTO Hears

“Sanctions, in order to be really enforceable, they have to have one particular characteristic: They have to be international,” said Thomas Kazakos, secretary general of the International Chamber of Shipping, at the World Trade Organization's public forum in Geneva. “Otherwise, you're always going to find ways to bypass them in a truly legal way.”

Caroline Yang, president of the Singapore Shipping Association, stressed that the maritime industry has long complied with international sanctions, including those against Iran and North Korea. But she said shadow fleet sanctions are different because they're observed only by a select group of countries, and even those countries differ in how the sanctions are implemented.

She specifically pointed to Russia-related sanctions, noting that the Group of Seven nations and others have imposed a global price cap on Russian oil for several years. But some of those countries, including the EU, recently lowered the price cap from $60 per barrel to $47.60 per barrel (see 2507180017, 2509120045 and 2509180042), while others, including the U.S., haven’t. Still others, including India and China, don’t officially observe any price cap.

“They are not even,” Yang said of Russia sanctions. For the price cap, “the U.S. is not participating, but the Europeans are participating. So you are seeing really a bifurcation.”

Yang also stressed that even though dealing with Russian shadow fleet ships may breach G7 sanctions, that isn’t “against the rules” of the U.N. Convention on the Law of the Sea, an international treaty that established a global regulatory regime for maritime activities.

She and other panelists said this makes it difficult to address risks posed by shadow fleet tankers, including the fact that many don’t operate with insurance because of their sanctioned status or because they’re trying to evade detection. “What happens when there is a collision?” Yang said. “You can't get compensation, or it will be very difficult.”

Shadow fleet ships make up about 2% of global maritime vessels, Yang said, and she expects that percentage to increase. “We believe that will grow if the sanctions continue,” she said. “We are concerned.”

Carl-Johan Hagman, regional head for Europe at the shipping company NYK Group, said his team is also concerned about a rise in older vessels without insurance, but it's challenging to address the issue using the U.N. treaty.

“The foundation of the United Nations law of the seas is innocent passage, and as long as that passage is innocent, the only way to restrict that passage is that the coastal state has the right to protect its environment in its territorial waters,” he said.

Yang called for a “global set of rules” to help shippers minimize the risks posed by shadow fleet vessels. “Governments all need to have one voice,” she said. “It is not about the money; it is about the safety of the ship, the safety of the crew.”

Tan Hung Seng, Singapore’s ambassador to the WTO, also acknowledged that a rise in geopolitical and trade tensions in recent years has caused a “lot more fragmentation” among governments, which has hurt global maritime trade. “Tariffs, sanctions and regional conflicts have really altered shipping corridors, and these have resulted in rising cost and heightened uncertainty for both businesses and consumers,” he said. “At the end of the day, this has a significant impact on all of us.”

Hagman also touched on the risks posed to tankers by the Houthis, which have attacked multiple commercial ships passing through the Red Sea in recent years (see 2402080083). He said NYK, which is headquartered in Japan, hasn’t sailed through the Red Sea in two years.

“We can cope as a company,” Hagman said. “But the world is paying a high price for us not transiting the Red Sea right now. And that is due to the security of our staff and colleagues.

“I think it’s a good investment if the world protected our shipping lanes.”