The Global Oil Tanker Market: An Overview as It Relates to Sanctions

The Global Oil Tanker Market: An Overview as It Relates to Sanctions

The Global Oil Tanker Market: An Overview as March 18, 2024
It Relates to Sanctions
John Frittelli
Sanctions on oil transport from Russia, Iran, and Venezuela have drawn attention to the global oil
Specialist in
tanker market and how it functions. The oil tanker market can be considered a resilient global
Transportation Policy
industry. This is in part because ship operators are global firms with global customers. It can

adapt to world events, such as wars and other conflicts, piracy, canal closures and restrictions,
and extreme weather, because oil generally is a fungible commodity. Based on any number of

world circumstances, oil shippers generally can find another buyer or seller for which a deal is
likely to be considered beneficial for all parties, and the prominence of intermediaries in this market (i.e., shipbrokers and oil
traders) facilitates rapid market adjustments. Many in Congress have expressed interest in how sanctions are affecting the
world oil market and how to possibly further restrict sanctioned countries’ oil revenues.
There are almost 7,500 oil tankers in the global fleet, of which over 1,600 are estimated to have participated in carrying
sanctioned oil (at least from January 2021 to mid-November 2023, according to one estimate). The sanctions discussed in this
report have led to longer average voyages, according to U.N. data. Voyage distance determines the most economically sized
tanker to use. Sanctions have raised the premium on large Aframax-sized tankers, which is the preferred size for moving
Russian oil, as well as for Suezmax tankers that move oil across the Atlantic Ocean. Tankers moving crude oil versus refined
petroleum products can be identified and distinguished at sea by size and deck equipment.
Sanctions have increased the value of older tankers. Traders of sanctioned oil may prefer older tankers because the longevity
of the sanctioned market is uncertain. One shipbroker reported that in 2022, there were over 600 secondhand tanker sales—a
record amount—with many vintage tankers bought at elevated prices. One analysis finds that 43% of the global fleet (697
tankers) identified as carrying sanctioned oil is between 16 and 20 years old. Tankers typically have an economic life of 20-
25 years, at which point they are sold for their steel scrap value. Those who track the buying and selling of secondhand
tankers have not been able to identify the buyer in many cases and can often only speculate on the buyer’s nationality.
Clarksons 2023 tanker registry lists about 250 tankers for which it cannot identify the owners.
Tanker ownership can make sanctions enforcement more complex, as ownership is more scattered and diverse now than in
the past. Independent tanker operators, rather than the major Western oil companies, own the vast majority of tankers. The oil
producers that still own large tanker fleets are mainly foreign government-owned oil companies. Multiple firms are typically
involved in a tanker’s ownership and control. For example, tanker owners could be hands-off investors with no day-to-day
involvement in their fleet’s operations, or a fleet nominally owned by one company could technically and/or legally be
divided, for liability reasons, into individual one-ship firms.
For a ship to be legitimately recognized, it must be registered in a country. The laws of that country apply to that ship, and
the ship must display that country’s flag; the ship otherwise can be assumed to be stateless and suspected of smuggling. The
majority of ships, including tankers, are registered in “open registry” countries under what are sometimes referred to as “flags
of convenience.” These countries do not require their registered ships to be owned or crewed by their citizens and typically
assess lower taxes and fees. Although the diversification of flag states muddles sanctions enforcement, the United States may
have some leverage over leading flag states. In fact, the two largest flag registries for tankers (Liberia and the Marshall
Islands) are run by U.S. firms headquartered in New York City and Reston, VA (a Washington, DC, suburb), respectively.
International standards for ship safety and security, including tankers, are intended to eliminate substandard ships and can
facilitate sanctions enforcement in some respects. For example, the International Maritime Organization recently adopted a
resolution calling on flag states to enforce prohibitions and regulations concerning the mid-ocean transfer of oil from one
tanker to another and calling on port states to enhance inspections for tankers known to have switched off their transponders
or otherwise tried to conceal their identity. Financial institutions are another means by which sanctions can be enforced, as
tanker owners rely heavily on insurers and bank loans. Some concerns associated with the sanctioned oil market include the
increased risk of oil spills and the uncertain, long-term ramifications of the establishment of a parallel global shipping
system.
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Contents
Introduction ..................................................................................................................................... 1
The Global Tanker Fleet .................................................................................................................. 2
Crude Oil Versus Product Tankers ............................................................................................ 2
Tanker Sizes .............................................................................................................................. 2
Newbuilding and Scrapping ...................................................................................................... 4
Secondhand Sales ...................................................................................................................... 5
Tracking Secondhand Sales ................................................................................................ 5
Tanker Owners and Operators ................................................................................................... 6
Tanker Crewing ................................................................................................................... 8
Flag Registration ....................................................................................................................... 8
Reflagging ......................................................................................................................... 10
International Standards .................................................................................................................. 10
The Role of Insurance and Classification Societies ................................................................. 11
The Role of Banks ................................................................................................................... 12
CIF Versus FOB Transactions ................................................................................................. 12
Standard Shipping Documents ................................................................................................ 13
Tanker Trading Routes .................................................................................................................. 13
Brokers Facilitate Fluidity ....................................................................................................... 14
Vessel Tracking ....................................................................................................................... 14
Automatic Identification System Equipment .................................................................... 14
Transfers and Transshipments ........................................................................................... 15
Floating Storage ................................................................................................................ 15
Free Passage Through Straits .................................................................................................. 15
Policy Considerations .................................................................................................................... 16

Figures
Figure 1. Oil Tanker Size Ranges .................................................................................................... 3

Tables
Table 1. Top 15 Tanker Owners ....................................................................................................... 6
Table 2. Top 15 Countries of Registration for Oil Tankers .............................................................. 8

Contacts
Author Information ........................................................................................................................ 16

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The Global Oil Tanker Market: An Overview as It Relates to Sanctions

Introduction
Sanctions on oil transport from Russia, Iran, and Venezuela that are enforced by the Department
of the Treasury’s Office of Foreign Assets Control (OFAC) have drawn attention to the global oil
tanker market and how it functions. The terms shadow, ghost, and dark fleet have been used to
characterize the challenges in identifying and tracking tankers carrying oil from those countries.1
Many in Congress have expressed interest in how the sanctions are working and how to possibly
restrict the flow of oil revenues further from those countries.2 An overview of the institutions and
features of the oil tanker market may be helpful to understand both obstacles and opportunities
for enforcing sanctions.
A number of CRS reports provide details on the sanctions regimes and their policy goals.3 The
sanctions impose financial costs on entities or firms that support the shipping of sanctioned oil so
as to discourage them from providing those services. U.S. firms that participate in sanctioned oil
shipping are subject to civil or criminal penalties for violating sanctions. Foreign firms could
have their U.S.-based assets seized or be prohibited from dealing with U.S. businesses or the U.S.
financial market. Being unable to serve the U.S. market could harm maritime service providers
because, other than China, the United States imports and exports far more cargo by sea than any
other country. In addition, the U.S. dollar serves as the preferred currency for international
transactions.
Sanctions are imposed on the transport of Russian, Venezuelan, and Iranian oil, with distinct
purposes for sanctions relating to each country. Sanctions on Iran seek to eliminate its oil exports
entirely.4 Sanctions on Venezuela seek to severely restrict its oil exports; these sanctions were
suspended in October 2023 for six months.5 Regarding Russia, the United States and other G7
countries, the European Union, and Australia have banned the importation of Russian seaborne
oil; for other countries importing Russian oil, sanctions seek to cap the price of that oil so as to
reduce Russian oil revenue.6 Russia accounts for about 12% of the world’s crude oil exports and
about 12% of refined product exports. For worldwide crude oil production, Russia produces about

1 Except where specified, the word “oil” in this report is used to mean both crude oil and refined petroleum products
(e.g., gasoline, diesel).
2 House Financial Services Committee, Subcommittee on National Security, Illicit Finance, and International Financial
Institutions, Restricting Rogue-State Revenue: Strengthening Energy Sanctions on Russia, Iran, and Venezuela,
hearing, 118th Cong., 1st sess., December 12, 2023. Bills introduced related to this topic include S. 3053, H.R. 3774/S.
1829, H.R. 5923, H.R. 4825, and H.R. 6201/S. 3197.
3 CRS In Focus IF10715, Venezuela: Overview of U.S. Sanctions Policy, by Clare Ribando Seelke; CRS Insight
IN12267, Iran’s Petroleum Exports to China and U.S. Sanctions, coordinated by Clayton Thomas; CRS In Focus
IF12452, U.S. Sanctions on Iran, by Clayton Thomas; CRS Insight IN11869, Russia’s War Against Ukraine: Overview
of U.S. Assistance and Sanctions, by Cory Welt; and CRS Report R46213, Oil Market Effects from U.S. Economic
Sanctions: Iran, Russia, Venezuela, by Phillip Brown.
4 CRS In Focus IF12452, U.S. Sanctions on Iran, by Clayton Thomas.
5 CRS In Focus IF10715, Venezuela: Overview of U.S. Sanctions Policy, by Clare Ribando Seelke.
6 The price cap is $60 per barrel for crude oil, $100 per barrel for high-value petroleum products (e.g., diesel), and $45
per barrel for low-value petroleum products (e.g., fuel oil). Elizabeth Rosenberg and Eric Van Nostrand, “The Price
Cap on Russian Oil: A Progress Report,” Department of the Treasury (Treasury), May 18, 2023,
https://home.treasury.gov/news/featured-stories/the-price-cap-on-russian-oil-a-progress-report.
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13%, Iran about 4%, and Venezuela under 1%.7 According to a 2015 estimate, about 61% of
world oil production is carried by ship.8
Historically, the oil tanker market has adapted to world events, such as wars and other conflicts,
piracy, canal closures and restrictions, extreme weather, technological revolutions (fracking), and
regulation (double hull tankers, emissions). Ship operators are global firms because their
customers are global and while there are grades of oil preferred by refineries, the commodity is
generally fungible. Based on any given set of world circumstances, which can change
continuously along with the price of oil, oil shippers can find another buyer or seller for which a
deal is likely to be considered beneficial for all parties. The prominence of intermediaries in this
market—that is, non-asset owning shipbrokers and oil traders (discussed below)—facilitates rapid
market adjustments.
The Global Tanker Fleet
As of 2023, there were almost 7,500 oil tankers in the global fleet, of which over 1,600 had
participated in carrying sanctioned oil (at least from January 2021 to mid-November 2023,
according to one source).9 Tankers at sea can be identified in two ways: by the type of oil
products they are designed to carry and by their size range, which limits their practical sailing
distance.
Crude Oil Versus Product Tankers
Tankers generally can be divided into two types: (1) those that carry crude oil, which tend to be
the largest tankers, and (2) those that carry refined products, which tend to be smaller. All tankers
have several different holds in the hull rather than one large tank for carrying product, but the two
types of tankers have some distinguishable features and functions. Product tanker holds, for
example, have coatings because they are washed between voyages to avoid contamination that
can result from carrying a variety of refined products. For this reason, the distinction between the
two types of oil tankers is also referred to as “dirty” (crude oil tankers) and “clean” (refined
product tankers). Some smaller crude oil tankers can carry fuel oil, while product tankers can
carry chemicals (chemical tankers are similar to product tankers but usually are smaller). Product
tankers have more elaborate piping on their deck than crude oil tankers, which, along with their
relative size, can help distinguish them at sea (e.g., in a satellite image).
Tanker Sizes
Voyage distance determines which size tanker would be more economical to use. On long
voyages, a tanker spends a greater portion of total voyage time at sea as opposed to loading or
unloading in port, so larger tankers that can carry more cargo would be more economical. Since
shorter voyages entail a greater portion of total voyage time in port, smaller vessels that can load
and unload more quickly are often more economical.

7 BP, BP Statistical Review of World Energy, 71st ed., 2022, https://www.bp.com/content/dam/bp/business-sites/en/
global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2022-full-report.pdf. Data are for 2021.
8 U.S. Energy Information Administration, “World Oil Transit Chokepoints,” October 15, 2019, https://www.eia.gov/
international/analysis/special-topics/World_Oil_Transit_Chokepoints.
9 Vortexa, Exclusive Report: The Fleet Operating in Opaque Markets – One Year Since the EU Import Ban, December
2023, https://marketinfo.vortexa.com/rs/837-MZE-578/images/Vortexa-Exclusive-Report-Opaque-Markets-
Dec2023.pdf (hereinafter Vortexa, Exclusive Report: The Fleet Operating in Opaque Markets).
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Figure 1 shows the various oil tanker size ranges of the world fleet as of 2023. The very large
crude carrier (VLCC) was born out of the Suez Canal closure from 1967 to 1975, when larger
tankers were needed to sail around the southern tip of Africa (the Cape of Good Hope).
Sanctioned oil is usually tracked on tankers ranging from the size of the Panamax to other larger-
sized tankers rather than the smallest “handysize” tankers, which, as Figure 1 indicates, reduces
that portion of the fleet by over 4,000 tankers.
Figure 1. Oil Tanker Size Ranges
World fleet as of 2023

Source: Clarksons Tanker Register, 2023.
Notes: VLCC = very large crude carrier; Afra = average freight rate assessment. Because of different densities,
crude oil and refined products wil yield different barrel capacities. Deadweight (dwt.) tons is a measure of a
ship’s cargo capacity.
Sanctions on Venezuela, Iran, and Russia have led to longer average voyages for seaborne oil.
From 2002 to 2022, the average distance for one ton of seaborne oil increased from 3,993 nautical
miles to 4,350 nautical miles and is expected to have increased to a record 4,578 nautical miles in
2023.10 Previously, some Russian oil sailed from St. Petersburg-area loading ports to northern
European ports; this oil is now sailing to India. Europe has replaced Russian oil with more distant
oil from West Africa, the U.S. Gulf, and Latin America. Russian far east ports are loading oil
destined for China. The change in Russian oil destinations has put a premium on Aframax tankers

10 U.N. Conference on Trade and Development (UNCTAD), Review of Maritime Transport 2023, September 2023, p.
5.
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and secondarily on Suezmax tankers for the Atlantic basin trading market. The preferred size for
the Russian shadow fleet is Aframax; in 2022, the average daily charter rates for these tankers
were three times higher than the yearly average for the previous three years.11
Newbuilding and Scrapping
Although sanctioned oil shippers often increase their fleet by purchasing secondhand tankers (see
“Secondhand Sales,” below), Russia and Iran are constructing new tankers. As of 2023, the
Russian shipyard Zvezda had 14 Aframax tankers under construction, in addition to four smaller
tankers.12 Russian oil shipper Rosneft has six tankers on order, and Russian shipping company
SCF Group (Sovcomflot) has ordered five tankers. SADRA Shipyard of Iran had one Aframax
tanker under construction, reportedly for delivery to Venezuela in 2024. This would be the fourth
tanker the Iranian shipyard has built for Venezuela in recent years.13 (Venezuela and Iran have
been shipping oil between themselves.)
It takes roughly two years from order to delivery of a tanker (with 9-15 months of actual
construction). Thus, in the short term, the supply of tankers is fixed, which results in a spike in
freight rates for tankers when demand for oil increases relatively suddenly or when longer
voyages are required suddenly (due to war, canal closures, and/or sanctions). In recent years,
between 150 and 250 new oceangoing tankers have been delivered annually, with almost all new
tankers built in China, South Korea, and Japan.14 At the end of 2022, the world price was around
$60 million for a newbuild Aframax tanker, $75 million for a newbuild Suezmax tanker, and $120
million for a newbuild VLCC.15 Despite the heightened demand for tankers, the total number of
oil tankers currently under construction is at a 40-year low because the major shipyards in China,
Korea, and Japan are oversubscribed with building containerships and liquefied natural gas
carriers.16
Tankers typically have an economic life of 20-25 years and then are sold and demolished for their
steel scrap value. In recent years, between 25 and 140 tankers have been scrapped per year.17
However, reflecting the increase in demand for tankers as a result of sanctions, in 2023, a record
low of seven product tankers were scrapped.18 For the first 15 years of its economic life, a tanker
undergoes drydock inspection every five years; subsequently, this inspection takes place every 2.5
years, and the inspections become more expensive. Tankers have shorter lives than other heavy
steel vehicles, such as railroad cars (typically 50 years), because of the constant exposure to the

11 BRS Shipbrokers, Annual Review 2023, p. 78, https://cdn.brsshipbrokers.skreycloud.com/
annualreview2023_34a4abaf04.html.
12 Clarksons Tanker Register, 2023.
13 Marianna Parraga and Mircely Guanipa, “Tanker Built by Iran for Venezuela to Carry Fuel Components in First
Trip,” Reuters, June 15, 2022, https://www.reuters.com/business/energy/tanker-built-by-iran-venezuela-carry-fuel-
components-first-trip-sources-2022-06-15/.
14 BRS Shipbrokers, Annual Review 2023, p. 75, https://cdn.brsshipbrokers.skreycloud.com/
annualreview2023_34a4abaf04.html.
15 BRS Shipbrokers, Annual Review 2023.
16 Asad Zulfiqar and Alex Longley, “Russia’s Shadow Oil Tanker Fleet Becomes Everyone Else’s Problem,” American
Journal of Transportation, February 18, 2023, https://www.ajot.com/news/article/russiaas-shadow-oil-tanker-fleet-
becomes-everyone-elseas-problem.
17 BRS Shipbrokers, Annual Review 2023, p. 75, https://cdn.brsshipbrokers.skreycloud.com/
annualreview2023_34a4abaf04.html.
18 “BIMCO Shipping Number of the Week,” Tanker Operator, January 10, 2024.
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marine environment, which causes rust and corrosion. Inspections in later years look for
deterioration in the thickness of the steel plates and fittings in a tanker’s cargo holds.
Secondhand Sales
Shipowners have been scrapping fewer older tankers, having found that effects of sanctions
appear to increase their value. Older tankers may be preferred for sanctioned oil traders because
the longevity of the sanctioned market is uncertain. One shipbroker reports that in 2022, there
were over 600 secondhand tanker sales—a record amount—with many “vintage tankers bought at
elevated prices.”19 Another source that tracks the tanker fleet recorded about 900 name changes to
tankers from 2022 to 2023, indicative of substantial secondhand sales.20 As of summer 2023,
prices for 15-year-old Aframaxes in the secondhand market had more than doubled, according to
one observer.21 Aframax tankers built before 2010 were selling for over $30 million (versus a
newbuild price of about $60 million in 2022 as mentioned above).22 Overall, prices for
secondhand tankers rose 17% in 2023 and to their highest level since 2008, according to one
source.23
The result of these secondhand sales is that much of the sanctioned oil is moving in older tankers,
which creates a safety risk.24 One analysis finds that 43% of the fleet (697 tankers) identified as
carrying sanctioned oil from January 2021 through November 2023 was between 16-20 years in
age.25 Of the 20 tankers under Venezuelan flag in 2023, 11 were built in the 1990s, and 23 of the
53 tankers in the National Iranian Tanker Company fleet in 2023 were 20 or more years old.26
Tracking Secondhand Sales
One aspect of the dark fleet is the obscurity of the owners. Those who track the buying and
selling of secondhand tankers often can only speculate on the nationality of the buyer. Clarksons
2023 tanker registry, a customary source of fleet information, lists about 250 tankers for which it
cannot identify the owners. A firm that tracks the value of secondhand ships has identified Gatik
Ship Management of India as a new buyer that has been actively acquiring secondhand tankers,
for example.27 Similarly, BEKS Ship Management and Trading of Turkey has acquired tankers to
transport sanctioned oil. In January 2024, OFAC sanctioned Hennesea Holdings, a UAE-based
firm established in late 2022 with a fleet of 18 tankers, for transporting Russian oil above the
price cap. Thus, Russian entities may not be directly involved in acquiring the majority of the

19 BRS Shipbrokers, Annual Review 2023, pp. 74 and 85, https://cdn.brsshipbrokers.skreycloud.com/
annualreview2023_34a4abaf04.html.
20 Clarksons Tanker Register, 2023.
21 See Figure 7 in Craig Kennedy, “Measuring the Shadows,” August 23, 2023, https://navigatingrussia.substack.com/
p/measuring-the-shadows.
22 Elizabeth Braw, “Greece is Making a Killing Selling Ships to Russia,” Foreign Policy, September 11, 2023,
https://foreignpolicy.com/2023/09/11/greece-russia-tankers-oil-sanctions/ (hereinafter Braw, “Greece is Making a
Killing”). The author cites data from VesselsValue Ltd. that tracks the value of maritime assets.
23 “BIMCO Shipping Number of the Week,” Tanker Operator, January 10, 2024.
24 Reuters, “Insight: Oil Spills and Near Misses: More Ghost Tankers Ship Sanctioned Fuel,” March 23, 2023;
https://www.reuters.com/business/autos-transportation/oil-spills-near-misses-more-ghost-tankers-ship-sanctioned-fuel-
2023-03-23/.
25 Vortexa, Exclusive Report: The Fleet Operating in Opaque Markets.
26 Clarksons Tanker Register, 2023.
27 Braw, “Greece is Making a Killing.”
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fleet carrying Russian oil; rather, non-Russian shipping firms and oil traders, some perhaps newly
established for this purpose, are supplying the shipping.28
While the buying and selling of secondhand tankers can be difficult to track, two international
regulatory requirements by the International Maritime Organization (IMO) provide some means
of tracking the vessels themselves. Somewhat similar to a VIN (vehicle identification number) on
an automobile, an IMO number is used to identify a vessel throughout its life. The IMO number
does not change with the sale, renaming, or reflagging of a vessel, and it is to never be used for
another ship (even after a ship is scrapped). The IMO number must be displayed on the ship and
is usually done so on its stern. A continuous synopsis record, which documents all the
administrative and regulatory activity related to the ship, is also required to be kept with every
ship. OFAC’s guidance for avoiding Russian oil price cap sanctions alludes to this continuous
synopsis record when it states that “enhanced due diligence may be appropriate for ships that
have undergone numerous administrative changes.”29
Tanker Owners and Operators
In the past, Western oil company vessels (such as the Exxon Valdez) were commonplace in the oil
tanker market, but these companies no longer own the majority of tankers in the global fleet.
Even before the infamous 1989 Alaskan oil spill, the Western oil majors were getting out of the
tanker owning business.30 Today, the vast majority of tankers are owned by independent tanker
operators.31 This can make sanctions enforcement more complex, as ownership is less
concentrated than in the past. As Table 1 indicates, the top five owners account for less than 13%
of the total fleet, and the top 15 owners for less than 28% of the fleet.
Table 1. Top 15 Tanker Owners
Ranked by deadweight tonnage of fleet, in the thousands
Number of
Tankers
(deadweight
Percent of World
Owner
Home Base
Ownership Type
tons, x1,000)
Fleet
China COSCO
China
State-owned
155 (21,742)
3.2%
Shipping
shipping line
China Merchants
China
State-owned
109 (18,862)
2.8%
shipping line
Euronav NV
Belgium
Independent tanker
60 (15,386)
2.3%
owner
Fredriksen
Norway
Independent tanker
86 (15,182)
2.2%
Group/Frontline
owner
Bahri
Saudi Arabia
National oil
81 (13,963)
2.1%
company

28 See, for example, Joe Wallace, Anna Hirtenstein, and Costas Paris, “The Secret Oil-Trading Ring that Fund’s
Russia’s War,” Wall Street Journal, February 19, 2024.
29 Treasury, Office of Foreign Assets Control (OFAC), Price Cap Coalition, “Oil Price Cap Compliance and
Enforcement Alert,” February 1, 2024, p. 2.
30 The five leading Western oil majors are BP, Chevron, ExxonMobil, Shell, and TotalEnergies.
31 Intertanko is an association of independent tanker owners, https://www.intertanko.com/.
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Number of
Tankers
(deadweight
Percent of World
Owner
Home Base
Ownership Type
tons, x1,000)
Fleet
Angelicoussis
Greece
Independent tanker
51 (13,749)
2.0%
Group
owner
National Iranian
Iran
National oil
53 (13,495)
2.0%
Tanker Company
company
Dyanacom
Greece
Independent tanker
70 (11,933)
1.8%
owner
Mitsui OSK Lines
Japan
Privately held
119 (10,982)
1.6%
shipping line
Sinokor Merchant
South Korea
Privately held
89 (10,055)
1.5%
shipping line
SCF Group
Russia
State-owned
95 (8,729)
1.3%
(Sovcomflot)
shipping line
Petronas
Malaysia
National oil
56 (8,700)
1.3%
company
International
USA (New York
Independent tanker
74 (8,220)
1.2%
Seaways
City)
owner
Thenamaris
Greece
Independent tanker
56 (8,174)
1.2%
owner
SK Shipping
South Korea
Independent tanker
29 (7,867)
1.2%
owner
Source: Clarksons Tanker Register, 2023.
Note: Deadweight tons is a measure of the cargo carrying capacity of a ship.
The oil producers that own large tanker fleets are mainly non-Western, state-owned national oil
companies: Bahri of Saudi Arabia; the National Iranian Tanker Company; Petronas (a Malaysia
nationalized oil company); Kuwait Petroleum; and ADNOC (Abu Dhabi National Oil Company).
Underlying the exit of Western oil majors in tanker ownership is a liability for oil spills and
increased specialization among tanker owners and operators.
Some tankers are owned by shipping lines that also own other types of cargo ships (e.g., Mitsui
OSK Lines and Nippon Yusen Kaisha). The two largest tanker owners are Chinese state-owned
enterprises that own a variety of ships. Sovcomflot of Russia is a state-owned tanker shipping
line. Fourteen of its tankers have been sanctioned by OFAC.32 Ship owning in Greece is
considered prestigious, and Greeks are well represented in the ownership of different kinds of
ships, including tankers (Angelicoussis Group, Dynacom, Thenamaris; see Table 1).
Multiple firms typically are involved in a tanker’s ownership and control. The owners could be
hands-off investors with no day-to-day involvement in a fleet’s operations. A fleet nominally
owned by one company could technically and/or legally be divided, for liability reasons, into
individual one-ship firms. Often, tanker owners hire a ship management company to handle the
technical upkeep of a vessel, including maintenance, repairs and dry dockings, and required
inspections.33 This firm may handle, or could outsource to a third firm, the vessel’s day-to-day

32 Treasury, OFAC, “U.S. Treasury Designates Russian State-Owned Sovcomflot, Russia’s Largest Shipping
Company,” February 23, 2024.
33 Michael D. Tusiani, The Petroleum Shipping Industry, (Tulsa, OK: PennWell Publishing Co., 1996).
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commercial operation, such as finding cargo for the vessel, fueling it (bunkers), and handling
other voyage details. The existence of these specialized firms that handle tanker operations makes
it relatively easy for investors to enter and exit the market. OFAC has sanctioned UAE-based
SUN Ship Management for managing Sovcomflot tankers.34
Tanker Crewing
The typical number of crew on a tanker is 22 sailors. Crewing could be outsourced to a “manning
agent” that provides a pool of crew for the vessel. The most common nationalities for ship crews
in the world fleet are Filipino, Russian, Chinese, Indian, Indonesian, Ukrainian, and Polish.35 A
vessel’s crew is likely to have knowledge about sanctions evasion tactics, such as ship-to-ship
(STS) transfers or Automatic Identification System (AIS) spoofing (discussed in “International
Standards”). OFAC and the U.S. Coast Guard have encouraged manning agents to ensure ship
crews are informed of monetary awards available to them for confidentially reporting illicit
activity.36
Flag Registration
Seldom is there any single national identity to participants operating a tanker. The crew of the
ship is likely to represent different nationalities among the captain, the officers, and deckhands.
Lack of a single national identity is evident by the multitude of national flags that ships are
registered under and the ease at which they reflag to another country.
The regulatory framework for tankers is somewhat analogous to private automobiles on public
roads (i.e., requiring registration, a license plate, a safety inspection, and insurance). For a ship to
be legitimately recognized, it must likewise be registered in a country. The laws of that country
apply to that ship, and the ship must display that flag; otherwise, it can be assumed to be stateless
and suspected of smuggling. The overwhelming majority of ships, including tankers, are
registered in “open registry” countries, sometimes referred to as “flags of convenience.” These
countries do not require their registered ships to be owned or crewed by their citizens and
typically assess lower taxes and fees. Table 2 displays the top 15 countries of registration for oil
tankers.
Table 2. Top 15 Countries of Registration for Oil Tankers
Ranked by deadweight tons (dwt)
Number of
Flag State
Tankers
Dwt. (000s)
Average Age
Liberia
1,211
125,720
11.5
Marshall Islands
1,286
114,367
10.1
Panama
908
87,573
14.2
Hong Kong
344
45,522
10.5
Greece
233
37,969
9.7

34 Treasury, OFAC, “Treasury Tightens the Price Cap with New Sanctions and Updated Guidance,” December 20,
2023.
35 UNCTAD Statistics, Maritime Transport, Seafarer Supply, https://unctadstat.unctad.org/datacentre/.
36 Treasury, OFAC, Guidance to Address Illicit Shipping and Sanctions Evasion Practices, May 14, 2020, p. 23,
https://ofac.treasury.gov/media/37751/download?inline.
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Number of
Flag State
Tankers
Dwt. (000s)
Average Age
Malta
403
33,404
11.2
Singapore
426
29,163
8.7
Bahamas
192
23,305
11.3
China
310
16,555
9.5
Iran
76
15,771
18.6
Saudi Arabia
78
12,195
12.6
Norwegian – Int’l.a
162
10,004
10.9
India
100
9,090
17.1
Japan
35
8,608
8.5
Danish – Int’l.a
150
7,733
10.8
Source: Clarksons Tanker Register, 2023.
Note: Dwt. (deadweight tons) is a measure of the cargo capacity of a ship.
a. The Norwegian and Danish international (Int’l.) registries are second registries in those countries designed
to compete with flags of convenience (FOCs). They offer some of the same tax and fee advantages of FOC
countries but may require that at least some of the crew (the captain or officers) be national citizens or are
paid at prevailing wages of the flag state. See Richard Coles and Edward Watt, Ship Registration: Law and
Practice, 2nd ed. (London: Informa Law from Routledge, 2009).
Although the multitude of foreign countries under which tankers are registered frustrates
sanctions enforcement, the United States may have some leverage over the leading flag states for
historical reasons. The two largest flag states for tankers (Liberia and the Marshall Islands) are
run by U.S. firms that are headquartered in New York City and Reston, VA (a Washington, DC,
suburb), respectively.37 Open registries emerged in the 1920s when U.S.-flag passenger liners
sought to avoid prohibition laws by reflagging their ships in Panama. Then, in the years prior to
the United States entering World War II, when the nation was seeking to remain neutral,38
reflagging ships supplying Britain under the neutral Panama flag was a means to avoid
entanglement in the war due to enemy fire on U.S.-flag ships.
U.S. interests largely encouraged the concept of flags of convenience; the three largest flag states
by deadweight tons (Liberia, Marshall Islands, and Panama; see Table 2) all have a historical
affiliation with the United States. Though U.S. shipowners may flag their ships in foreign
countries, they can still be effectively under U.S. control in case of war or national emergency
because they remain under U.S. ownership. This was widely perceived to be a better alternative to
the sale of U.S.-based shipping lines to foreign control, as the more expensive U.S. crews
required under U.S.-flag registration were not cost competitive. Thus, some shipowners have
called these types of flag registries (i.e., ships registered in one country but owned and controlled
by a different country, namely the United States) “flags of necessity.” The Marshall Islands flag
was established in the early 1990s when the United States became concerned, due to diverging
interests, with the reliability of Panama- and Liberia-flag ships that were U.S.-owned.39 The
Liberian, Marshall Islands, Panamanian, Bahamian, and Honduran registries are the only foreign

37 The Vanuatu ship registry is also administered by a firm located in New York City.
38 Shipping Neutrality Act of 1935, 49 Stat. 1081; and the Neutrality Act of 1939, 54 Stat. 4.
39 Rodney Carlisle, “Second Registers: Maritime Nations Respond to Flags of Convenience, 1984-1998,” The Northern
Mariner, July 2009, pp. 319-340.
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flag ships that receive special eligibility for U.S. government-provided war risk insurance
coverage.40
Flag registration fees could be a significant revenue source for the governments of foreign flag
states. Thus, these countries face an issue with the wholesale de-flagging of tankers involved in
sanctioned oil movements. For instance, the Department of State notes that Liberia’s ship
registration fees are among the country’s primary sources of revenue, along with its exports of
rubber and iron ore.41
Reflagging
Oil sanctions have resulted in an increase of countries switching ship registrations from one
country to another. According to U.N. data, oil tankers registered under the Iranian flag increased
from 17 vessels in 2019 to 83 vessels in 2020, multiplying the flag’s fleet cargo capacity by
nearly 50 times.42 This data point coincides with reports that Panama has withdrawn its flag
registration for 136 ships linked to Iran’s state oil company.43 The Russian flagged tanker fleet
and the Venezuela flagged fleet have held steady over recent years at around 400 tankers and
about 20 tankers, respectively. Liberia, Panama, and the Marshall Islands have formed an
information sharing compact where they advise each other if they de-flag a tanker or suspect a
tanker is participating in sanctioned oil trading to prevent these tankers from “flag shopping”
among them.44
Port state authorities compile and share their inspection results in annual reports, such as the
“Paris MOU” or the “Tokyo MOU,” identifying flag registries with low- and high-risk safety
records.45 For example, Gabon, Palau, and the Cook Islands, which reportedly are the flags of
tankers recently carrying sanctioned oil,46 are newer registries with less reputable safety records.
Reputable shipowners might be discouraged from flagging their ships in countries such as these
because their ships are more prone to inspection delays in port. Generally, newer flag states may
accept inferior ships because more established flags can afford to reject them. Over the long term,
substandard ships do not represent a strong business case; substandard ships are a niche market.
International Standards
International standards for the safety and security of ships, including tankers, are intended to
weed out substandard ships and can facilitate sanctions enforcement in some respects. Flag states
remain primarily responsible for enforcing international standards related to safety, pollution
prevention, and security, but much of that burden has shifted from the flag state to the “port

40 33 C.F.R. §308.2(a).
41 Department of State, “U.S. Relations with Liberia,” August 2, 2019, https://www.state.gov/u-s-relations-with-liberia/
; and CRS In Focus IF12493, Liberia, by Tomás F. Husted.
42 UNCTAD Statistics, Maritime Transport, Merchant fleet by flag of registration and by type of ship,
https://unctadstat.unctad.org/datacentre/.
43 Elida Moreno, “Panama Has Canceled Registry to 136 Iran-linked Vessels,” Reuters, January 18, 2023.
44 Hellenic Shipping News, “The Registry Information Sharing Compact is a Major Step Forward in Sanctions
Enforcement,” April 22, 2020.
45 Paris MOU, “White, Grey and Black List,” https://parismou.org/Statistics%26Current-Lists/white-grey-and-black-
list; and Tokyo MOU, “Annual Report,” https://www.tokyo-mou.org/publications/annual_report.php. The International
Chamber of Shipping (ICS) also reports on flag-state performance (see ICS, Shipping Industry Flag State Performance
Table: 2023/224, https://www.ics-shipping.org/wp-content/uploads/2024/01/Shipping-Industry-Flag-State-
Performance-Table-2023-2024.pdf).
46 Vortexa, Exclusive Report: The Fleet Operating in Opaque Markets.
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state.” In other words, countries enforce these standards when ships arrive or as a condition for
entering their coastal waters and ports.
International standards are established by treaties and conventions agreed to by seafaring nations.
These agreements are arrived at via the London-based U.N. agency, the IMO.47 The U.S. Coast
Guard is the primary U.S. representative to the IMO.
The institution and practice of international conventions for ship safety can be traced to the
response to the Titanic disaster in 1912. The standards are enforced by both flag states and port
states. For instance, the U.S. Coast Guard’s inspection checklist when boarding ships in U.S.
ports is based on these standards. Enforcement is as effective as the flag states and port states are
willing and have the resources to put toward that effort.
Three of the key standards are often referred to by their acronyms—SOLAS, MARPOL, and
STCW—which stand for the following:
• International Convention for the Safety of Life at Sea (SOLAS, 1974), as
amended;
• International Convention for the Prevention of Pollution from Ships, 1973, as
modified by the Protocol of 1978 relating thereto and by the Protocol of 1997
(MARPOL, an acronym for marine pollution); and
• International Convention on Standards of Training, Certification and
Watchkeeping for Seafarers (STCW) as amended, including the 1995 and 2010
Manila Amendments.
The IMO recently adopted a resolution calling on flag states to enforce prohibitions and
regulations concerning the mid-ocean transfer of oil from one ship to another (i.e., STS transfer).
The same IMO resolution called on port states to enhance inspections for ships known to have
switched off their AIS or otherwise tried to conceal their identity.48 Ship crews are required to
keep a detailed logbook of all activities related to navigating the vessel and all incidents while on
a voyage; port state authorities can use this record as a means to detect suspicious or fraudulent
activity (by comparing the logbook to AIS tracking history, for instance).49
The Role of Insurance and Classification Societies
Financial institutions are means by which sanctions have been enforced, as tanker owners rely
heavily on insurers and bank loans. In addition to the age of a tanker and its chosen flag, the
choice of insurance carrier and classification society can help port state control authorities
identify suspicious ships. Ship insurers play a role in maintaining shipping standards for their
own financial reasons—that is, charging an adequate premium based on their assessed risk. To
assess a vessel’s seaworthiness and therefore its risks, the insurance industry relies on
independent marine engineers and surveyors employed by classification societies. These firms
regularly inspect ships to ensure that they meet and maintain “class,” which are specification
criteria for ship construction and maintenance.
A distinction between the Iranian and Russian sanctions is that classification societies can be
sanctioned for providing their services to tankers carrying Iranian oil but are exempt in the case of

47 International Maritime Organization (IMO), https://www.imo.org/.
48 MarineLog, “IMO Assembly Seeks to Crack Down on Dark Fleet,” December 7, 2023.
49 IMO, Resolution A.916(22), Guidelines for the Recording of Events Related to Navigation, adopted November 29,
2001, https://wwwcdn.imo.org/localresources/en/KnowledgeCentre/IndexofIMOResolutions/AssemblyDocuments/
A.916(22).pdf.
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tankers carrying Russian oil.50 Russia has its own classification society, but the organization has
been expelled from the industry’s self-policing group, the International Association of
Classification Societies.51 Just as the Paris MOU and Tokyo MOU rank flag states based on their
safety record, so too do they rank classification societies (which are referred to as “recognized
organizations”).
While ship insurers typically provide hull insurance, shipowners have formed mutual insurance
clubs to provide themselves with protection and indemnity (liability) insurance, such as for an oil
spill. Liability insurance is mandatory for tankers under the IMO International Convention on
Civil Liability for Oil Pollution Damage, 1992. London, Switzerland, and New York are the
traditional headquarters of marine insurers. However, given sanction restrictions, Russia and
India have reportedly formed or contemplated forming their own insurance clubs.52
The development of flags of convenience created an important change for classification societies.
Prior to flags of convenience, a classification society generally had a monopoly on its home
country’s fleet. For example, the American Bureau of Shipping inspected all U.S.-flag ships; the
Lloyd’s Register inspected all U.K.-flag ships. With the development of flags of convenience, the
flag could choose among classification societies, resulting in competition among the classification
societies. This development has affected classification society inspections, causing tension
between upholding standards and the accounting for the possibility that a client could shop
around for another classification society if the client’s ships do not pass inspection.53
The Role of Banks
Banks provide loans for ship operators to acquire new vessels, and banks exchange the funds
between oil buyers and sellers. As with the insurers, before providing a loan for vessel
acquisition, banks are to confirm that the ship meets classification standards. The chosen flag
state also would likely factor into the borrower’s risk profile. This could create an obstacle for the
sanctioned oil market in acquiring secondhand vessels, as the banks would be sanctioned for
providing loans to ship operators in the sanctioned oil market.
For individual oil transactions, the oil buyer’s bank guarantees payment to the seller’s bank
through a “letter of credit” document. The banks are used as a means to ensure payment for
international transactions, particularly between buyers and sellers that do not have a long-
standing, trustworthy relationship with one another. This might create a dilemma for sanctioned
oil buyers and sellers that are new to one another, as banks would be sanctioned for participating
in the transaction.
CIF Versus FOB Transactions
Sanctions enforcement involves a review of the standard documentation used in ocean shipping.
This documentation indicates which party is paying for the ocean transportation. If the seller
arranges and pays for the ocean transportation, it would be a CIF transaction (cost, insurance, and

50 Treasury, OFAC, OFAC Guidance on the Implementation of the Price Cap Policy for Crude Oil and Petroleum
Products of Russian Federation Origin, revised on December 20, 2023, https://ofac.treasury.gov/media/931036/
download?inline (hereinafter OFAC Guidance, revised December 20, 2023); and Treasury, OFAC, Sanctions Risks
Related to Shipping Petroleum and Petroleum Products from Iran, September 4, 2019, https://ofac.treasury.gov/media/
46006/download?inline.
51 International Association of Classification Societies, https://iacs.org.uk/.
52 BusinessLine (Chennai), “India Planning Own P&I Entity to Safeguard Shipowners,” January 5, 2024.
53 Jack Devanney, The Tankship Tromedy: The Impending Disasters in Tankers, 2nd ed., 2006, p. 23.
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freight). In this case, the oil buyer does not take title (ownership) of the oil until it is delivered to
the final destination port. Thus, the price of the oil is the delivered price that includes the cost of
insuring the shipment and the cost of shipping it. The FOB option (free on board) means the seller
is responsible only for the cost of loading the oil on the tanker at the exporting port. The oil buyer
at this point takes title of the goods and pays for the cost of the ocean transportation and insuring
the cargo.
Whether CIF or FOB, in the case of Russian oil price cap sanctions, parties involved in a
transaction are to maintain itemized costs delineating the price of the oil versus the cost of other
services, such as insurance, freight, and customs services. Parties involved in trading Russian oil
are also to keep an attestation on file that the oil is being sold below the price cap.54
Standard Shipping Documents
A letter of credit, along with other standard shipping forms, can be the basis of evidence in
sanctions enforcement. For evidence of delivery, the oil buyer’s bank looks to the “ocean bill of
lading” before transmitting the funds to the seller’s bank. An ocean bill of lading is an
international standard contract between the ocean carrier and the party paying the freight (the
ocean carrier’s customer). It states the port of loading and discharge; the amount and nature of
cargo being shipped; the freight charges, among other shipment particulars; and boilerplate
contract language between the cargo owner and tanker owner. It is also the document of title of
the goods shown.
Before the oil can enter the importing nation’s commerce, it must “clear” through customs (in the
same way international travelers clear customs in airports). A standard customs entry form
provides the particulars of a shipment and generally the most precise information on the nature,
quantity, and weight of the cargo being imported.55 The importer will typically employ a “custom
house broker” that is licensed to handle the clearance of the import product through the importing
nation’s customs agency. Customs brokering services are included among the maritime services
that can be sanctioned if a shipment violates the Russian oil price cap. The customs entry form,
the bill of lading and an invoice from the seller to the buyer, and a bank’s letter of credit form the
key documents that typically comprise an international transaction. These documents can be used
by sanction enforcers to verify details on an oil shipment, spot evidence of forgery, or both. They
also can be used to discover inflated rates to disguise Russian price cap violations.
Tanker Trading Routes
Tankers are hired (chartered) for time periods generally divided into three categories: voyage
charter, time charter, and contract of affreightment (COA). A voyage charter (also known as a
“spot” charter) means the tanker has been hired for a particular voyage from origin to destination
port. Consecutive voyage charters involve more than one voyage. Tanker operators may bid on a
particular shipment through a broker hired by the oil seller or buyer. A time charter is for an
identified time period, usually between 2 and 10 years, that an oil shipper rents the tanker. In a
COA, the oil shipper and carrier commit to a specified amount of oil being delivered over a
specified duration at a specified shipping rate, without specifying any particular vessel or exact
dates of delivery. This type of contract gives flexibility to the carrier to provide the tankers in the

54 For OFAC’s suggestion on what an attestation would consist of, see OFAC Guidance, revised December 20, 2023, p.
12.
55 The World Customs Organization works toward harmonizing and standardizing customs processes worldwide,
https://www.wcoomd.org/.
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most efficient manner possible. COAs are often used by tanker owners participating in tanker
pools where the pool operator has flexibility to deploy the pooled ships so as to reduce the
amount of empty sailing days to the greatest extent possible. The pool of ships is specific to
tankers of similar design that are appropriate for serving a particular market.
To try for maximum efficiency, tankers generally seek to be deployed on triangular routes where
two of the three legs carry payloads, and the third (and shortest) leg sails empty.56 The empty leg
is referred to as ballast because tankers need to carry seawater when not carrying cargo for the
stability of the ship. The Russia sanctions have upset the normal trade routes and may have
precluded the possibility of some triangular routing. With more limited destination markets, it is
more probable that oil tankers from Russia, Iran, and Venezuela are sailing in pendulum routes
with the return voyage in ballast. This can significantly increase the cost of shipping, which may
reduce the profit margins for the sanctioned oil producers. It has also upset the usual sailing
patterns for non-sanctioned oil, increasing those shipping costs as well.
Brokers Facilitate Fluidity
Most seaborne oil shipments are arranged through brokers—a broker for the oil company and a
broker for the tanker owner. In many cases, an oil broker (trader) rather than an oil company is a
negotiating party. These so-called “middlemen” contribute to the fluidity of the oil market and are
one of the reasons why the market as a whole has quickly adapted to the changes brought about
by sanctions. According to one report, numerous newly formed oil traders have been selling much
of Russia’s oil, replacing the larger traditional commodity houses that consider price cap trading
too risky.57
Vessel Tracking
Automatic Identification System Equipment
OFAC considers a vessel’s tracking history generated by AIS to be a due diligence check before
firms provide maritime services to a vessel. AIS is a vessel transponder that is primarily intended
to help ship captains avoid collisions at sea. The system displays a vessel’s heading and speed, as
well as the identity of the vessel to other vessels in an area. It was designed to augment radio
communication between ship captains. The system can be turned off, for instance, in known
pirate infested waters. Since it was designed as a voluntary safety device, it has shortcomings in
trying to track vessels. In addition to turning AIS off, false information can be entered into the
system, such as about the identity and location of the vessel. These tactics are believed to be
regularly occurring with sanctioned oil shipments. OFAC guidance includes establishing a “soft
lock” on AIS equipment so it can be turned off in emergencies but would involve classification
societies in checking the change log of a vessel.58 Ships can also be tracked by satellite images,
but this can be thwarted by disguising the identifying equipment on the deck of a tanker or by
repainting the vessel.

56 Bunker Ports News Worldwide, “Triangulate This! MR Tanker Atlantic Trade Patterns,” June 29, 2013,
https://www.bunkerportsnews.com/News.aspx?ElementId=31f48eb3-31ba-49ff-9b5a-5d7b09c4ac5c.
57 Dmitry Zhdannikov and Nidhi Verma, “Insight: Obscure Traders Ship Half Russia’s Oil Exports to India, China after
Sanctions,” Reuters, July 27, 2023, https://www.reuters.com/business/energy/obscure-traders-ship-half-russias-oil-
exports-india-china-after-sanctions-2023-07-27/.
58 Treasury, OFAC, Department of State, and U.S. Coast Guard, Guidance to Address Illicit Shipping and Sanctions
Evasion Practices, May 14, 2020, p. 12, https://ofac.treasury.gov/media/37751/download?inline.
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Transfers and Transshipments
Oil tankers may use STS transfers and transshipment hubs to try to disguise their movement of
sanctioned oil. STS transfers of sanctioned oil need to be distinguished from more common
“lightering” operations. Lightering is the process by which a tanker too large or with a draft too
deep to enter port (such as a VLCC) unloads or loads some of its oil to a smaller tanker offshore
from the harbor. At some ports, VLCCs unload or load by hooking up to an offshore pipeline.
Tanker trackers are now sometimes observing STS transfers between two tankers positioned side-
by-side at sea or along coastal areas not traditionally associated with lightering areas, which is
believed to be a method of sanctions avoidance so as to disguise the origin of the shipment, for
instance. STS transfers must follow a pre-approved operations plan by the flag state of each
vessel, and the coastal state must be notified two days prior.59 These and other requirements can
help identify illicit transfer operations. Tanker trackers have also observed an uptick in deliveries
to and shipments from oil storage hubs, such as the transshipment ports of Singapore and
Fujairah. These storage hubs store and blend oil from different sources for economic reasons, but
their increase in activity might be due to shippers seeking to obscure sanctioned oil movements.
Floating Storage
It appears that much of Iran’s tanker fleet is being used to store its crude oil for long periods,
either off its coast or off the Malaysian coast in the Malacca Strait.60 Floating storage units are
tankers that are built specifically to store oil rather than transport it, but they are usually
associated with an offshore oil production platform. A transport tanker can also be used to store
oil, and Iran appears to use this strategy to move oil into an anticipated market before actually
having a buyer. Thus, floating storage represents another possible activity that a tanker may be
engaging in and thus something else to decipher for those tracking and identifying tankers at sea.
Free Passage Through Straits
Much of the world’s seaborne oil passes through several narrow straits or canals. For example,
Russian oil exported from terminals around the St. Petersburg region must pass through the
Danish Straits, and Russian oil exported from Black Sea ports must pass through the Turkish
Straits (the Bosporus and Dardanelles waterways). The Suez Canal, the Strait of Hormuz, the Bab
el-Mandeb Strait, and the Straits of Malacca are also significant chokepoints for ships, as they all
involve passage through the territorial waters of coastal states. These passageways might make
logical points to screen or restrict sanctioned oil shipments.
Because of the added dangers for ships sailing through restricted waterways, such as narrow
straits and canals, the home country of some of these waterways requires that ships seeking
passage hire a local pilot that has expertise regarding the local conditions of the waterway to
navigate the vessel through the waterway. An escort by a tugboat may also be required. Although
some have speculated that pilot services could be refused for sanctioned oil shipments,61 most of
these waterways are governed by long-standing treaties that guarantee the right of passage for

59 Skuld, “Ship to Ship Transfer Safety,” November 13, 2020, https://www.skuld.com/topics/cargo/liquid-bulk/ship-to-
ship-transfer-safety/.
60 Armen Azizian, Exclusive Report: Iran’s Crude/Condensate Flows and Fleet – 2023 Review, Vortexa, January 18,
2024, https://www.vortexa.com/insights/crude/exclusive-report/irans-crude-condensate-flows-and-fleet-2023-review/.
61 Safety4Sea, “Denmark Concerned Over Tanker Pilots Due to Russia Sanctions,” September 27, 2022.
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merchant ships. Customary international law regarding the right of innocent passage may also
apply.62
Whether or not the home country of a restricted waterway could require proof of adequate
insurance before allowing ships to pass through is an issue that has been raised. In cases where
hiring a local pilot is required, the captain is still absolutely responsible for the ship, and the
shipowner is still liable for any damages stemming from an incident. Turkey caused a backup of
ships through its straits in December 2022 by requiring independent confirmation from insurers
that the ships were covered. In November 2023, there were reports about whether Danish
authorities would be similarly checking on insurance for vessels transiting the Danish straits.63 A
coastal state can expect to pay for oil spill cleanup if ships do not carry adequate insurance
coverage.
Policy Considerations
Sanction evasion tactics could arguably increase the risk of an oil spill because they circumvent
various practices that support safety. Turning off AIS transponders for long periods, conducting
STS transfer operations without knowledge and approval of the coastal state, and use of older
tankers that otherwise might be scrapped may raise safety concerns. Sanctioned oil carriers are
also engaging with less reputable flag states and classification societies for their approval to
operate. Some are also circumventing traditional insurers and financing mechanisms that, as
explained above, provide an independent check on ship seaworthiness.
The establishment and use of nontraditional maritime service providers is essentially creating a
second, parallel global shipping network. It is uncertain what the long-term ramifications of this
development might be.

Author Information

John Frittelli

Specialist in Transportation Policy

62 The right of innocent passage is the right of ships to pass through the coastal waters of a country unobstructed when
the ship is destined to another country and not visiting a port of the coastal country. See appendix to nondistributable
CRS Report R42335, Iran’s Threat to the Strait of Hormuz, coordinated by Kenneth Katzman and Neelesh Nerurkar
(available to congressional clients on request).
63 Maritime Executive, “Denmark May Begin Checking Russian Tankers’ Insurance in Baltic,” November 15, 2023,
https://maritime-executive.com/article/denmark-may-begin-checking-russian-tankers-insurance-in-baltic.
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