The shadow fleet helping Russia to evade sanctions

Economic sanctions were meant to be the West’s secret weapon against Russia, a way of crippling Vladimir Putin’s war machine and bringing his invasion of Ukraine to a halt without Nato firing a shot. Instead, Russia’s economy and military remain in rude health. After recent heavy attacks north of Kharkiv, Putin’s troops have seized more than 38 square miles of territory and stretched Kyiv’s already thinly deployed defences as they grind forward in Donbas. Putin has demoted his long-serving defence minister Sergei Shoigu, replacing him with the little-known economist Andrei Belousov. Appointing a finance specialist as military chief was a reminder that armies march on money. In Russia’s case, oil money.

Remarkably, since February 2022 the Kremlin has defied more than 16,000 separate sanctions imposed by the US and EU; the destruction of the Nord Stream gas pipeline, which ended Gazprom’s stranglehold on Europe’s energy supplies; and a costly war that will consume up to 8 per cent of Russia’s GDP this year. Despite these catastrophes, Russia’s economy is poised to grow at a faster pace than any other G7 nation. It’s currently running a budget deficit of just 0.8 per cent of GDP, down from 1.9 per cent last year. Its overall federal revenues hit a record $320 billion in 2023 and are expected to go even higher in 2024. Those are remarkable figures for a country spending some 40 per cent of its state budget on war.

The secret of this remarkable resilience? A shadow fleet of oil tankers registered outside the G7, which has allowed Russia to thumb its nose at western sanctions and to maintain an uninterrupted stream of lucrative oil exports.

Russia produces around ten million barrels of oil a day and exports half of that, putting it behind the US and Saudi Arabia as an international supplier.