Why in the News?
During coverage of the Russia-Ukraine conflict, many Western media outlets have referred to tanker ships transporting Russian crude oil or oil products to other countries as a “shadow fleet.”
What is shadow fleet?
What are Flags of Convenience (FoCs)?
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How do corporations with large fleets obscure ownership and origin of cargo? (Challenges to find the origin country of the ship)
- Complex Ownership Structures: Corporations often create complex ownership arrangements to hide the true identity of shipowners. This may involve setting up multiple shell companies, where each company owns only one or two ships. The use of offshore accounts and subsidiaries further adds to the opacity.
- Frequent Changes in Ship Registration and Management: Ships frequently switch their flag state (known as “flag hopping”) to avoid detection and regulatory compliance.
- Renaming Vessels: Ships involved in activities that could trigger sanctions often change their names to avoid being traced back to previous sanctioned activities.
- Using FoCs and Non-Compliant Jurisdictions: Ships may be registered in countries that are not signatories to international regulatory frameworks, such as the International Maritime Organization (IMO).
- For instance, Eswatini has emerged as a FoC because it does not follow IMO guidelines, allowing for less regulatory oversight.
Why has India been accused of hosting a shadow fleet?
- Increased Russian Oil Shipments: Indian firms and Dubai-based entities with Indian ties have been involved in transporting Russian oil, raising suspicions of sanction evasion.
- Certification by Indian Register of Shipping (IRS): The IRS certified more ships linked to Russian oil post-sanctions, which some viewed as supporting “shadow fleet” operations.
- Use of Flags of Convenience: Ships connected to India often registered under foreign flags, obscuring their ownership and the origin of their cargo to bypass sanctions.
What are the different ways through which ships ensure they don’t lose their insurance?
- Switching Insurance Providers: If a ship loses its Protection and Indemnity (P&I) insurance cover due to violations of sanctions, the owner may shift the vessel’s management to a different company with valid P&I insurance.
- Changing Ship Management and Ownership: By changing the management entity or even the registered owner (via shell companies), ships can regain insurance cover without having to comply with the initial sanctions.
- Use of Different Flag States: Ships registered under FoCs or jurisdictions not compliant with international regulations face less scrutiny, which can help them maintain insurance coverage despite potentially violating sanctions.
- Renaming Vessels: This practice helps erase the association of the ship with any prior incidents or sanctions violations, allowing the ship to be insured under a different identity.
Way forward:
- Enhance Oversight and Transparency: India should tighten regulations on ship certification and ownership disclosure, ensuring compliance with international norms to prevent any association with sanction-evading activities.
- Strengthen International Coordination: India should collaborate with global maritime bodies to align its policies with international shipping standards, promoting responsible trade practices while safeguarding its economic interests.
