The Shadow Fleet: How Trump's Sanctions Backfire in the Era of Globalisation

American President Donald Trump is unleashing a whirlwind of tariffs and sanctions, determined to punish countries that defy him. However, there's a growing fear that this approach will only accelerate the creation of bypass routes, undermining the US's global power. The shadow fleet of oil tankers, which has grown exponentially since 2017, is a prime example of this phenomenon. Trump's strategy of throttling Russia's oil exports by diverting them to countries like India has been ineffective, with Russia resorting to shadow fleets to transport its oil. Meanwhile, Trump's allies are questioning the effectiveness of his approach, with many arguing that swift, clearly targeted, and allied-backed sanctions are the only way to achieve success. History suggests that Trump's strategy may ultimately backfire, much like the Ottomans' imperial overreach 600 years ago.

Key Takeaways:

• The number of shadow ships transporting crude oil has exploded, with an estimated 9.3mn metric tons of crude oil transported per month, accounting for nearly half of global seaborne crude exports.
• China accounts for 15 per cent of the trade, which poses a significant challenge to Trump's strategy.
• Trump's tariffs have shattered the trust of allies, making it difficult to achieve decisive results with sanctions.
• Previous administrations have also struggled to curb tech exports to China, which has led to Beijing developing its own tech and smuggling in chips using third parties.
• Swift sanctions imposed by the US on Russia have been ineffective in reducing Russian trade with non-western countries.

Statistics:

• 9.3mn metric tons of crude oil transported per month by shadow ships between 2017 and 2023.
• 15 per cent of the trade accounted for by China.
• 2022: Russian oil exports diverted to India, inflicting a $32 discount per barrel on Russian crude due to higher shipping costs.
• March 2023: Russia accepted a $32 discount per barrel on its Urals crude relative to January 2022.

Sources:

• A lmost 600 years ago, when the Ottomans conquered Constantinople, they learnt the danger of imperial over-reach. (No specific source provided)
• US President Donald Trump is not only unleashing wildly capricious tariffs (a word, incidentally, drawn from Arabic), he is also implementing sanctions. (No specific source provided)
• Edward Fishman writes in a powerful new book Chokepoints: "Great powers once rose and survived by controlling geographic chokepoints like the Bosphorus. American power in the globalised economy relies on chokepoints of a different kind." (No specific source provided)
• A report from the Royal United Services Institute suggests that shadow fleets have created "a permanent parallel oil trading system beyond internationally recognised policies and controls." (No specific source provided)
• An economic analysis using machine learning models suggests that "between 2017 and 2023, dark ships transported an estimated 9.3mn metric tons of crude oil per month -- nearly half of global seaborne crude exports." (No specific source provided)
• Agathe Demarais, of the European Council on Foreign Relations, notes in her book Backfire, that past experience suggests that sanctions only truly work well when they are implemented swiftly, clearly targeted and -- crucially -- backed by allies. (No specific source provided)
• An unpublished paper from economists at the Bank for International Settlements notes that Swift sanctions imposed on Russia "significantly reduced Russian trade with the firms in the west" but was "ineffective in reducing Russian trade with non-western countries." (No specific source provided)