Since the onset of Western sanctions targeting Russia’s oil exports, the global oil transportation industry has become increasingly complex and uncertain. What was once a structured and transparent market—largely controlled by well-established shippers, insurers, and financial institutions—has given way to a more opaque, fragmented, and risk-laden system. The imposition of price caps and trade restrictions has not stopped the flow of Russian oil; but, it has shifted much of that business into the shadows, complicating global shipping logistics, insurance coverage, and regulatory enforcement.
A New Era of Oil Trade
In 2022, as part of broader efforts to weaken Russia’s economy, the United States, the European Union, and the other G7 nations implemented a price cap of $60 per barrel on Russian oil exports. To enforce this measure, Western firms were prohibited from providing key services—shipping, financing, and insurance—for any cargo sold above that threshold. The goal was to constrain Russian oil revenues while preventing severe disruptions to the global energy market.
However, the reality has been far more complicated. Instead of shutting down Russian oil exports, the restrictions pushed Moscow and its trade partners to seek alternative methods. A vast and loosely regulated “shadow fleet” emerged—hundreds of aging tankers operating outside traditional regulatory frameworks, often changing ownership structures and flags to avoid scrutiny.
The volume of oil transported by these vessels has grown significantly, with some estimates suggesting that the shadow fleet now moves nearly 1.7 million barrels of Russian oil per day. India and China, two of Russia’s largest buyers, have continued purchasing its crude, often at discounted rates. Meanwhile, an informal network of intermediaries, including trading houses, smaller shipping firms, and offshore shell companies, has stepped in to facilitate these transactions.
The Insurance Quandary
One of the biggest complications for global oil transportation now revolves around insurance. Traditionally, the world’s major insurers—most of them based in London and Europe—played a critical role in the maritime industry, ensuring that vessels met safety standards and were financially protected against potential damages or environmental liabilities. However, with many of these insurers unable or unwilling to cover vessels carrying Russian oil, the industry has been forced to adapt.
This shift has created an opening for alternative insurers, often based in Russia, China, and the Middle East. Yet, many of these entities lack the financial strength and oversight mechanisms of their Western counterparts, raising concerns about the reliability of their coverage. If a major spill or accident occurs involving an uninsured or underinsured vessel, the environmental and financial consequences could be severe.
The difficulties surrounding maritime insurance have been underscored by the case of Ingosstrakh, one of Russia’s largest insurers. In January 2025, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on the company, alleging that it had played a key role in insuring vessels within Russia’s shadow fleet.
Ingosstrakh has publicly stated that it has taken steps to avoid supporting non-compliant vessels, claiming that since 2022, it has refused or canceled coverage for over 100 suspect ships. The company also asserts that it was sanctioned for insuring a vessel before it joined the shadow fleet, suggesting that even well-intentioned actors are struggling to navigate the rapidly shifting regulatory environment.
Safety and Environmental Risks
Indeed, industry experts warn that the new oil transport landscape is far more dangerous than before. The shadow fleet consists primarily of older vessels that would have otherwise been retired but are now being sold at high prices to undisclosed buyers. These ships often operate without proper maintenance, inspections, or safety standards, raising the likelihood of mechanical failures, spills, or even full-scale disasters.
A major example occurred in December 2024, when two Russian-operated tankers sank in the Kerch Strait near Crimea. The lack of transparency surrounding their ownership and insurance coverage made it difficult for authorities to assess liability or secure compensation for the damage.
Western regulators have acknowledged these risks but have struggled to enforce compliance. Many shadow fleet vessels routinely change their names, deactivate their Automatic Identification Systems (AIS), and transfer oil between ships in international waters to obscure their origins. This makes tracking their movements and enforcing sanctions a nearly impossible task.
A Fractured Market
The long-term consequences of these disruptions are still unfolding, but it is clear that the oil shipping market is undergoing a fundamental transformation. Major Western insurers and shipping firms have lost significant market share, while a parallel system has emerged, largely outside the reach of U.S. and European oversight.
For oil buyers, this shift presents both opportunities and challenges. While countries like India and China benefit from discounted Russian crude, they must also contend with the increased risks associated with relying on a fleet of aging, underinsured tankers. For Western energy firms and financial institutions, the challenge lies in maintaining compliance with sanctions while navigating an increasingly fragmented and unpredictable market.
Looking Ahead
The uncertainty surrounding Russia’s oil exports is unlikely to dissipate anytime soon. If anything, the market is likely to become even more complex as Moscow continues to adapt to evolving restrictions and Western regulators attempt to close loopholes.
One potential solution being discussed among policymakers is the introduction of stricter tracking and verification systems for maritime trade, including enhanced monitoring of vessel ownership structures and real-time tracking of cargo movements. However, implementing such measures at a global scale is fraught with logistical and political challenges.
For now, the global oil shipping industry remains caught in a state of flux. What was once a relatively transparent and stable system has become a high-stakes game of cat and mouse, with regulators, insurers, and traders all struggling to keep up with the shifting tides? As the world continues to adjust to the new realities of sanctioned oil trade, one thing is clear: the risks, both financial and environmental, have never been higher.