Garvan Walshe is a former national and international security policy adviser to the Conservative Party
Three years into the Russo-Ukrainian war and there is no obvious end in sight.
Without a modern air force, Ukraine cannot force breaches in Russian defensive lines in the Donbas and retake the territory Russia has seized.
Without being able to risk its own, Russia can only push back Ukrainian forces at enormous cost in the lives of its own soldiers. The last year has seen the war develop into two parallel fights.
On the ground, Russia has been able to advance slowly, its cloud of drones battling Ukraine’s cloud of drones, while taking extremely heavy losses, in an updated version of the later stages of the World War I Western front, when Germany advanced with infiltration tactics, while the allies had yet to introduce the tank to significant effect.
At range, Russia has continued to attack Ukrainian civilian infrastructure, particularly in power generation, in order to divert Ukrainian resources towards securing its civilian population and away from fighting. Ukraine’s increasingly strong ranged attacks are aimed at Russia’s oil and gas production infrastructure.
For Ukraine, in the winter at least, the crucial variables are heat and power: can it heat its population and provide enough power for them to live and for industry to work? For Russia it is money: can its oil and gas industry earn enough to sustain the expensive war machine, now between 40 and 70 per cent of the state budget?
The defence budget alone amounts to around $200 billion each year.
Russia’s importance to the global oil trade means the West hasn’t imposed an oil embargo, choosing instead to apply a price cap: nobody connected to G7’s economic governance is allowed to buy, sell or transport oil above this cap. Crucially this includes shipping and shipping insurance, the latter based at Lloyd’s. To evade this limit, Russia sells to China and India, which are outside the cap system, through a “shadow fleet” of ageing uninsured ships.
This accounts for 70 per cent of Russian seaborne oil exports.
Can this be reduced?
RUSI’s Jack Watling has suggested it can, by targeting the portion of this trade going through the Baltic. At least two fifths of Russian seaborne exports go through the Baltic sea, and must pass Finland, Estonia, Poland, Sweden and Norway: all of which are strong supporters of Ukraine’s defence against Russian aggression.
Can this be interdicted? Watling suggests an environmental treaty to prevent the shadow fleet sailing.
International law poses some problems. The 1857 Copenhagen convention requires ships’ “innocent passage”, as the term of art in the law of the sea has it through the Danish straits. The UN Convention on the Law of the Sea requires states to allow innocent passage through their 12 nautical mile limit territorial waters (a significant section of the Baltic sea is entirely composed of such territorial waters).
The question is whether such passage is indeed innocent.
Under the convention, “wilful and serious pollution” however does not constitute innocent passage, and the reason the shadow fleet’s ships are in the shadow fleet, and not the official insured fleet is because they are in too poor a condition to be insured against oil spills. Preventing unseaworthy ships from passing the straits with polluting cargo does not prevent Russia from navigating them. It just requires them to use acceptably safe ships to do so. After all Russia has the option of exporting this oil at the price cap on insured, safe ships that don’t carry the risk of pollution.
If this were implemented, what difference could it make to the Russian defence budget?
The total value of the Baltic shadow fleet trade is $20 billion per year. The added value to Russia from trading at market prices (currently $60 per barrel) rather than the price cap ($47.60) is around $4 billion (exporting at the price cap is always possible). Reducing the price cap would increase the amount of money denied to Russia to $10 billion – or 5 per cent of its stretched defence budget.
Russia is bound to try and oppose this legal innovation.
Put aside for a moment that Russia is not known for respecting international law. More importantly, it will take it a good deal of time to mount a challenge to such an initiative. Disrupting the shadow fleet through the Baltic could deny billions of dollars to Russia just when it needs them most, putting pressure on its export earnings together with Ukraine’s accelerating campaign of attacks on the oil export infrastructure.
It would be a more than appropriate response to the Kremlin’s campaign of drone attacks on Nordic airports.
