COLUMN | Taking on the dark tanker fleet, part I: flag state responsibility should be flag state liability [Offshore Accounts]

Want to make the seas safer? Time to put the "Dark Fleet" of aged and unsafe oil smuggling tankers out of business. And the best way to do that is to squeeze not just the ownership and managers of these dangerous and often uninsured vessels, but also the ship registries that support their sanctions-busting activities.

We turn to the tanker industry this week in the first part of a double column addressing the biggest issue facing the entire marine industry. The governments of the world’s leading democracies should turn their attention to flag states and the entities that operate them.

In many countries now, ship registration is a lucrative business, where public rights are appropriated for private gain. Our argument is that the states that register substandard ships should be liable for them, and that the owners and managers of private ship registries should be on the hook for the vessels they certify. Those who register and profit from dark fleet vessels should face liability if those vessels are uninsured and cause pollution.

So, what is the Dark Fleet?

The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury defines the Dark Fleet as the following:

“Older vessels that are anonymously owned and/or have opaque corporate structures that are solely deployed in the trade of sanctioned oil or oil products and engage in various deceptive shipping practices. 

"The shadow trade also involves ships that may rely on unknown, untested, sporadic, or fraudulent insurance. Without legitimate, continuous insurance coverage, these ships may be unable to pay the costs of accidents in which they are involved, including oil spills, which entail tremendous environmental damage, significant safety risks, and extensive costs. 

"Some ships have also shifted away from industry standard classification societies, which play a key role in assessing and ensuring the seaworthiness of vessels, adding to environmental and safety concerns.”

It is only a matter of time before there is a major oil spill caused by the Dark Fleet, which will cost the unlucky taxpayers of some coastal state billions to remediate beaches and fishing grounds ravaged by thousands of tons of crude oil.

The recent near misses show how close we have been to another Exxon Valdez or Torrey Canyon type disaster.

Who can end this problem?

So far, the three biggest of some fifty or more incidents involving these shady ships have all involved sanctions-busting vessels that were (amazingly) in ballast at the time. This run of luck will not last. Therefore, it is time for the marine industry’s regulators to stop wringing their hands and huffing and puffing about the well-known problems, and to take action.

Can we expect the International Maritime Organisation (IMO) to do anything? No, because it views all flag states as equal, even those that are demonstrably corrupt, incompetent, and venal. The IMO is concerned about fraudulently registered ships, and has published papers in the threats from fake ship registries. However, the large tankers involved in recent high-risk accidents were legitimately registered with IMO member states.

The Dark Fleet does not need to use the services of the fake Nauru Maritime Administration International Ship registry or the illegal Vanuatu International Ship Registry, because perfectly legitimate flag states are happy to certify these aged, uninsured, and often unsafe ships. Many of those flags are little known and lacking in regulatory capability, often run under the auspices of obscure African states, but they are IMO members and they operate in plain sight.

Can we expect classification societies to do anything? No, because the most unsafe Dark Fleet vessels are not certified by the strong and stringent classifications. Instead, an array of second tier certification bodies provides a sometimes false veneer of compliance and respectability. We have previously covered the issues and incidents with Perenco and the International Naval Surveys Bureau of Athens, which is such a body.

Can port states do anything? Possibly, but a lot of the worst offending and most dangerous vessels deliberately avoid port calls, pumping oil between vessels moored outside territorial waters to obfuscate its origins. And the ports of destination for Dark Fleet oil imports often welcome cheap crude oil from Russia, Venezuela and Iran, even if the vessels delivering it are dangerous and uninsured. I am thinking especially of India and China, which are the largest importers of oil that is otherwise sanctioned by the European Union and the United States.

Can we take action against the owners of the Dark Fleet vessels? OFAC has tried this, placing sanctions on numerous vessels it deems involved in the Russian oil trade, and on the ship management companies running them to cut them off from the US dollar banking system. But this is a game of whack-a-mole – no sooner are vessels sanctioned than they are bought and sold through anonymous offshore shell companies and emerge with new papers, new owning entities, and often new names.

Hit the flag states

This article proposes concrete steps to put an end to the dangers of the Dark Fleet, and to transfer the risks from innocent coastal states and their public purses onto those who profit from the Dark Fleet without taking any responsibility – the flag states that profit from selling registration, and the companies that profit from managing the Dark Fleet registration process.

Unlike anonymous shell companies, flag states are easy to find, and they have legal responsibilities for vessels flying their flag under the international Law of the Sea Convention (LOSC). Articles 94(3)-(5) and 211(2) of the LOSC require flag states to take action on ship safety and vessel-sourced pollution and to meet generally accepted international rules and standards set out by the IMO. Flag states have liability arising from their own failure to comply with their due diligence responsibilities for the vessel they flag.

The LOSC provides for legal recourse by states at the International Tribunal for the Law of the Sea (ITLOS). LOSC granted the tribunal the power to prescribe provisional measures with the sole purpose of protecting the marine environment and for states to seek redress.

Additionally, the many privately owned companies benefiting from selling ship registration services in some of the more exotic jurisdictions are also vulnerable to sanctions from OFAC, and to legal action where they have demonstrated negligence in their responsibilities to the protection of the environment and the application of IMO rules on safety and technical standards. Since ship management is often profit-making business, even those state-owned registries may not have sovereign immunity for their ship registration function if they are deemed to be exercising a commercial function in registering vessels, rather than a sovereign function. The sooner these principles are tested in the courts, the better.

Let’s look at the three highest profile Dark Fleet incidents and see the common elements.

Pablo blowing up was a graphic reminder

On May 1, 2023 the aged, Gabonese-flagged Aframax tanker Pablo exploded spectacularly off the coast of Malaysia, killing three crewmembers and sending a column of thick black smoke high into the air. The beneficial owner of Pablo was never discovered, and the vessel had no valid insurance, having spent years seemingly shipping up to 16 million of barrels of sanctioned crude from Iran to Asia (according to TankerTracker.com).

Pablo was owned by a single vessel shell company registered in the Marshall Islands. The tanker’s flag had been switched to Gabon just six days before the explosion.

This incident graphically highlighted the recurring problem of the Dark Fleet of tankers dedicated to smuggling Russian, Venezuelan and Iranian oil: an old tanker without insurance flagged to a dubious registry operated in an extremely unsafe manner. Malaysia ended up towing the vessel to Indonesia for scrapping, and cleaning up the mess itself.

"The Pablo casualty is tragic, and a stark reminder of what we have been saying all along: the shadow fleet poses a serious threat both to people’s lives and to the marine environment," Rolf Thore Roppestad, the CEO of Gard, the large protection and indemnity insurer, told Bloomberg after the disaster. "What worries me is that there are ships like these passing through high-traffic straits every day. So, the likelihood of more accidents like this happening is actually quite high.”

We agree.

Andromeda Star collision off Denmark

Since then, surprise, further incidents have arisen. On March 2, the 15-year-old Panama-flag Aframax tanker Andromeda Star was involved in a collision as it rounded the northern tip of Jutland, Denmark, on its way to Russia to load crude. Thankfully, the 700,000-barrel capacity vessel was in ballast when it struck a small Bulgarian-flagged cargo vessel. The tanker had no valid insurance, and its emergency generator was not working.

Andromeda Star had been purchased by the Seychelles company Algae Marine in November 2023, with unknown ultimate beneficial ownership. Its Indian manager, Margao Marine Solutions, was apparently founded in late 2022, and did not answer any questions from media outlets, seemingly being without a valid phone number.

Strange that.

Ceres I and Hafnia Nile accident

Last month, the Sao Tome and Principe-flagged very large crude carrier (VLCC) Ceres I, reputed to be a major carrier of Iranian oil, was involved in a collision with the Singapore-flagged product tanker Hafnia Nile, which resulted in the latter catching fire, and the VLCC being detained after it had switched off its automatic identification system (AIS) and departed the scene.

The emergence of the Dark Fleet has led to serious issues of safety and standards for a large portion of the world tanker fleet. Some 600 tankers are now believed to be part of the Dark Fleet including over one hundred VLCCs.

“For the first time in many decades, safety at sea is becoming worse, not better, and it’s really because of the shadow fleet,” said Jan Stockbruegger, a political scientist specializing in maritime security at the University of Copenhagen, to Vox.

Low quality shipping registries lie at the heart of the problem

As reposted in Baird Maritime earlier this year, Selwyn Parker quoted marine consultancy Winward, which observed that, “overseas companies have been quickly established following the outbreak of the war to obscure vessel origins and ownership, and to appear law-abiding/non-sanctioned.”

Our fellow columnist Michael Grey observed in this publication only a few weeks ago that the Dark Fleet was overturning decades of progress towards safer shipping:

“[The] long march towards better quality, capable administrations, proper responsibility, and improved maritime safety has been abruptly put into reverse by the emergence of the dark fleet and their improbable flag states. There will be no 'implementation' of international rules, the ships may be unsafe and possibly uninsured, their AIS has been extinguished or faked at will, and their class certificates are null and void. In effect, this is evasion on a global scale – evasion of sanctions, of regulation, of safety and all the other advances brought about by 70 years of regulatory improvement.”

As those ship registries reliant on Western banks have reduced their exposure to Russian-linked vessels, so less scrupulous registries have stepped in to fill the void. The ship registries of Gabon, the Comoro Islands and Guinea-Bissau have each more than doubled in size in 2024 so far, the industry press reports.

Indeed, the Cook Islands, a Pacific island state with a population of just 20,000 people, now has 259 registered ships, equating to just under seven million gross tons. The registry has more than doubled in size in one year alone, according to data from Clarksons, the shipping services company.

Stateless ships are fair game

Having a legal registration is critical – a vessel without registration can be boarded by any coastal state or navy at any time under the LSOC.

Flag states have exclusive jurisdiction over their vessels on the high seas, and also the right of innocent passage through the waters of coastal states – of particular concern for Denmark, given the volume of Russian oil carried by low quality tankers under exotic flags exiting the Baltic through Danish waters. However, a vessel without a flag state enjoys no such privilege.

Seek legal redress from flags

So, the first recourse against low quality registries is legal – from states harmed by the failure of flag states to exercise due diligence over their tonnage. Sell the flag, take the liabilities.

Malaysia could and should be making claims at the ITLOS against Gabon and Sao Tome, seeking compensation for the costs incurred cleaning up the damage caused by Pablo and the incident in which Ceres I was involved. Since neither vessel appears to have been insured and no beneficial owners has been found, those remediation costs should not be borne by the Malaysian Marine Department, but by the flag states of Gabon – an OPEC member that produces around 200,000 barrels of oil per day – and Sao Tome, a micro-state with just 225,000 inhabitants, best known for its coffee.

Under Article 91(1) of LOSC, international law acknowledges the right of every state to "fix the conditions for the grant of nationality and for the right to fly its flag." However, the same article provides that there "must exist a genuine link between the state and the ship."

If Gabon wants to make money selling ship registry services to Russian state entities, that is its prerogative, but the authorities in Libreville should expect to risk paying compensation to coastal states if those ships are sinking, exploding, or causing pollution and damage. It is not at all clear how a link exists between Gabon and the ill-fated Pablo, nor between Sao Tome and Ceres I.

These flags appear to be failing the most basic test of due diligence in the exercise of their responsibilities by accepting, in return for commercial gain, vessels without a genuine link to them as flag states.

SovComFlot chooses Gabon, logically

Earlier this year, Lloyds List reported that Russian state-owned tanker operator Sovcomflot “reflagged 18 tankers to Gabon from Liberia since the US government sanctioned seven of its vessels, along with its Dubai-based shipmanagement subsidiary SUN Ship Management last year... There are now 54 tankers totalling 5.5 million DWT flagged with Gabon that are defined as being part of the dark fleet of tankers shipping Venezuelan, Russian and Iranian oil, according to Lloyd’s List Intelligence data.”

If Russia wishes to operate a fleet of state-owned oil tankers, that is its prerogative as a sovereign state, as is the right of the American government to apply sanctions against Russia and Russian entities for political reasons if it sees fit (and vice-versa if Moscow wishes to retaliate).

But Gabon and Sao Tome have responsibilities as flag states for the tonnage they register, both to ensure a genuine connection exists with those vessels, and that the ships are neither polluting the environment, nor operated at standards below the levels mandated by the IMO.

Who is actually registering these ships?

But is it the government of Gabon actually exercising responsibilities as a flag state directly? No. The Gabon registry is run completely from the UAE by a company called Intershipping Services, and has been since 2018.

Intershipping Services declares on its website that it is “the Sole Authorised Representative for Maritime Administration of Gabonese Republic” from its “worldwide head office in Ajman, UAE."

The company selling Gabon ship registry and issuing certificates on behalf of the state of Gabon does not even appear to have an office in Gabon or anywhere in Africa. So much for a genuine link between a state and the vessels flying its flag. In this case there does not even appear to be an obvious link between the state and the company administering its registry, other than unknown flows of cash.

No accounts for the company are available (UAE companies do not publish their accounts publicly), and there is no publicly accessible database of beneficial owners and directors of entities registered in Ajman.

How much money is Intershipping making from the sale of Gabonese ship registry? What are its revenue and profits? How much does it pay its directors? And how much does it pay to the Gabonese treasury for the delegation of its sovereign authority?

Intershipping could and should disclose its revenues and profits

No information seems to be available in public – please correct us if we have missed the company’s audited accounts and the statement of funds paid to the Gabonese treasury.

Gabon does not appear to publish its receipts from Intershipping. The sovereign nation of Gabon has put its reputation and its legal responsibilities in the hands of this opaque entity that manages over five million tons of shipping, including many vessels known to be connected to the Russian state tanker company, as well as vessels involved in serious marine incidents. The people of Gabon deserve to know who is selling its flag.

Sao Tome silence in Cyprus, Guinea-Bissau run from Greece?

It is the same in Sao Tome. The Sao Tome registry, under which the VLCC Ceres I was registered, is a complete black box. A company with an office in Cyprus has been delegated full authority to manage the Sao Tome fleet and boasts "fifty years of experience" amongst its staff. Honestly, you would expect to find more than 100 combined years of experience on any ship, just amongst the crew, so this is not a great sign.

Best of all is the Guinea Bissau registry where "International Ships Registry of Guinea-Bissau”, a private corporation registered under Greek law, has been duly appointed and exclusively delegated by the Republic of Guinea-Bissau, Ministry of Transports and Communications.

Cyprus and Greece might want to look into whether these entities established in their states and operating hundreds of vessels are actually fulfilling their obligations under European Union law, given EU sanctions on Russia.

And Guinea-Bissau and Sao Tome, like Gabon, should be making public who owns their ship registries and how much they are paid by these entities, and the private registry operators should make their accounts public.

OFAC should take a look

OFAC can and should look into who is behind these registries, which appear to be facilitating the shipment of Russian, Iranian, and Venezuelan crude. OFAC can then determine whether the registries and their (currently unknown) owners should have access to the US dollar banking system. OFAC has already sanctioned ship managers and ship owners for their complicity in violating US sanctions on Russia, Iran, and Venezuela.

Now is the time for OFAC and the EU authorities to look at these private ship registry managers and the individuals who own them. Those that are profiting from the sale of vessel registration should be prepared to accept the consequences, if they are registering substandard ships that cause pollution or damage or violate the law.

If you are not familiar with the acronym FAFO, please look it up.

Next week, we look at how the benefits of private ship registries accrue to individuals, rather than the states that delegate their authority to them.

Background reading

The struggle against low quality ship registries, opaque ownership structures, and substandard ships has gone on for two decades as this piece from 2013 highlights. The bloody Russian invasion of Ukraine has made the problem worse, but the Iranian regime was the first to master the Dark Fleet strategies and tactics now also being employed by Moscow and Caracas.

OFAC’s list of entities subject to secondary sanctions for aiding Russian aggression makes an interesting read of both individuals and companies.