“Shipping in 2026 is going to get darker.” - Michelle Wiese Bockmann, Senior Maritime Intelligence Analyst, Windward
The so-called “shadow fleet” isn’t a unified group of ocean vessels. They are ships that operate outside the system, carrying sanctioned crude oil from Russia, Iran, and Venezuela.
These poorly maintained, often uninsured ships are now the target of military action by the U.S., U.K., and EU. They are being boarded, seized, escorted into port, and tied up in court. But, as Kenneth Engerrand, an adjunct professor of admiralty law at the University of Houston Law Center said to E&E News, “Arresting the vessel is just step one.”
It is expensive to hold and maintain these ships while the legal and diplomatic processes play out, and the company that took possession is often left holding the tab.
One company… GMS… thinks they have an answer. They believe they can scrap about 100 sanctioned and seized ships annually, if (and it is a big IF) they are given permission by the U.S. Treasury to acquire them.
About the “Shadow Fleet”
Depending on the source you check, there are between 900 and 2,000 aging oil tankers operating in the shadows.
They often sail under false flags, spoof their locations, and turn off monitoring systems. They often transfer their cargo at sea to minimize the time spent in port, and sometimes operate without insurance.
Enforcement at sea is messy, expensive, and legally complex. Bridge-ranked crew members know they are operating outside the system and will take steps to avoid attention and the authorities.
Here are a couple of recent examples:
On January 23, 2026, the French Navy seized the tanker Grinch in the Mediterranean, acting on U.K. intelligence. The Grinch appeared to be headed toward the Suez Canal, was flying a false Comorian flag, and was likely bound for China or India. The United Nations Convention on the Law of the Sea (UNCLOS) provides authority to inspect stateless or falsely flagged vessels on the high seas, so the French were within their rights to board the ship. Now they have to figure out what to do with it.
On January 7th, the Bella 1 picked up Venezuelan oil under Guyana’s flag and was followed and later boarded by U.S. forces. The crew of the ship eventually painted a Russian flag on the hull and re-registered as Marinera. As the BBC pointed out, you cannot legally change a ship’s flag mid-voyage without also undergoing a legitimate transfer of registry. That too opened a door through which the U.S. was able to enter.
Seven shadow tankers have been seized since December of 2025 by the U.S., U.K., and EU, led as we saw in the case of the Grinch by France. We’re going to need a solution to the problem of what to do with these vessels soon, especially as physical enforcement continues.
Shady Scrap
GMS is the world’s largest buyer of ships for scrap. They have requested permission from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to buy and scrap shadow fleet tankers.
Scrap value can reach tens of millions of dollars per vessel. GMS believes it could remove 100 tankers annually, implying that it would take up to 20 years to eliminate a 2,000-vessel fleet if no new ships are added (which we know they will be).
According to Reuters reporting, 16 sanctioned tankers were recycled in 2025. That is a serious increase over the 1 scrapped in 2024 and the 1 in 2023.
The concern is that while scrapping removes illicit capacity for moving sanctioned oil, and improves safety and compliance, it also risks putting money into the hands of some pretty questionable people. And those questionable people can always find new crappy old ships to move their sanctioned product in.
GMS does have precedent on their side. They purchased the North Korean-flagged Wise Honest at U.S. auction in 2019 after seizure and forfeiture. What they are looking to do is turn that precedent into a larger agreement that would allow them to achieve scale and reduce costs by avoiding auctions for individual vessels.
Insurance as a Quiet Enabler
One of the frequently cited issues with shadow fleet ships is that they are not covered by insurance. When they are, the coverage may be invalidated by flying a false flag.
Reuters did an investigation into New Zealand-based Maritime Mutual’s Protection & Indemnity coverage of shadow-fleet vessels. They found that the company has covered 231 tankers since 2018, and that 130 of them carried Iranian or Russian energy products after sanctions had been established.
New Zealand authorities searched Maritime Mutual’s premises but did not file charges, and the company has denied any wrongdoing.
I’m going to be honest about this one. Expecting shadow tankers to carry insurance seems a bit like wanting the boss of your bank-robbing crime gang to offer dental coverage. After all, rule breakers break rules. Well, apparently here we have to contend with honor among thieves.
As David Tannenbaum, director of Blackstone Compliance Services and a former U.S. Treasury sanctions expert said, “Without that they’re dead in the water. [...] Even Iranian and Russian ports aren’t going to allow an uninsured vessel within their waters.”
So insurance is not peripheral, it is foundational. Maybe it is another way to contain the operation of the shadow fleet.
According to the Pulitzer Center, Russia’s oil revenue from its shadow fleet grew 5 percent in 2024 to $16.4 Billion. Iran generates up to $70 Billion annually from crude and petrochemicals. We can be pretty sure that money is not going to feed and shelter their citizens. In the case of Russia, it is funding the war against Ukraine, and in Iran it is allowing the current regime to suppress uprisings and cling to power.
The recent enforcement we have seen from the U.S., U.K., and EU looks like progress — and in some ways, it is. At the same time, it is not a simple fix. Any solution will require having an answer for what to do with vessels, crews, and cargo after they are seized that accounts for legal and economic considerations.
