British accountant aids Russia's billion-dollar shadow fleet

The shadow fleet, sometimes called the "phantom fleet," enables Russia to export approximately 4 million barrels of oil daily, circumventing Western sanctions. This generates revenues of several billion dollars annually, which help finance its war efforts in Ukraine, writes the British daily in its Thursday edition. Since 2022, Russians have spent over $10 billion on these ships.

Furthermore, the "FT" interviewees say the risk of an oil spill from these outdated tankers and the ensuing catastrophe is substantial.

74-year-old Ormerod, who, from December 2022 to August 2023, assisted Moscow in building a fleet of old and worn-out tankers, who spent over $700 million on acquiring these ships. Each vessel was purchased by a different company registered in the Marshall Islands, with transactions financed by Dubai-based Eiger Shipping DMCC, owned by Lukoil.

British shipping broker Braemar, one of the largest players in the sector, facilitated at least nine of these purchases.

The management of the tankers was entrusted to additional companies registered in the United Arab Emirates, owned by shipping magnate Muhammad Tahir Lakhani, who is Pakistani but holds British citizenship.

The FT explains that companies based in Dubai do not need to adhere to Western sanctions as long as they do not receive funding from G7 countries.

Determining the true buyer of the tankers was complicated because the shell company purchasing a ship was entirely owned by another company, which in turn was owned by yet another, and so on, with Ormerod at the very end of this chain. The acquired tankers sailed under the flag of the Cook Islands.

All these intricate manoeuvres aimed to conceal that the transactions were conducted on behalf of Lukoil. The tankers are available for Russia's use, and Russian banks finance the purchases, clarified Craig Kennedy, a Russian oil and tanker expert from Harvard University.

Together, the 25 ships have transported some 120mn barrels of oil from Russia since they were originally acquired by Ormerod. At a conservative estimate of $60 a barrel that would amount to $7.2bn in exports, calculated the daily.

Western companies are considering decommissioning the tankers after 15 years of use due to wear and potential repair costs. The average age of ships in the Russian shadow fleet is 18 years, and it is unlikely they can be insured against an oil spill, said Benjamin Hilgenstock, an expert on oil sanctions.

Shadow tankers carrying Russian oil pass through European waters, including in the Baltic Sea and Mediterranean, several times per day. Several incidents have already happened and a major disaster is really only a question of time, added Hilgenstock.

In December 2022, EU restrictions took effect, prohibiting the import of oil by sea, and a global price cap for Russian oil was set at $60 per barrel, agreed upon by the EU and G7.

It was anticipated that these measures would cut Russia off from a large portion of the world’s tanker fleet, as insurers like Lloyd's of London cannot insure ships transporting Russian oil due to sanctions, regardless of their destination, unless the oil is sold under the price cap program.

Russia redirected its exports to countries like India, China, and Turkey, which became major buyers of its crude oil as Europe reduced its purchases.

Finnish broadcaster Yle recently presented a report indicating that out of approximately 600 ships transporting Russian oil, nearly half are part of the so-called shadow fleet. The Kremlin exports the raw material mainly through the Baltic Sea, and several vessels passing through the Gulf of Finland are on the international blacklist and have been classified as "for repair" or "for scrap."