How China uses 'dark fleets' to circumvent trade sanctions

Many people may wonder how China can control so much of the global trade despite factors like sanctions and tariffs. One explanation is its use of "dark fleets" or "shadow fleets." These are ships that work in secrecy and often give China a significant price advantage over its competitor countries. This is especially true when it comes to the Chinese oil industry.

What are 'dark fleets'?

They are fleets of ships that operate off the grid, "evading compliance with safety or environmental regulations, avoiding insurance costs or engaging in other illegal activities," said the International Maritime Organization. Dark fleets can be made up of any type of ship but are most frequently tankers.

Most of these dark fleets "use tactics designed to hide their location or the origin" of their products, said The Guardian. This can include navigation gaps "created by switching off a vessel's automatic identification system transponder; ship-to-ship transfers in international waters away from scrutiny; 'flag hopping,' or altering a ship's country of registration; and complex ownership and management structures that change each month," said Michelle Wiese Bockmann, a senior analyst at Lloyd's List Intelligence, to The Guardian. Many of these ships are "past their prime and considered unsafe," the outlet added.

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How does China use these fleets?

China typically uses them to transport oil from other countries to circumvent sanctions, mainly involving Iranian oil. Since the United States has placed sanctions on buying Iranian oil, the oil China gets from Iran is "often transferred from ship to ship at sea and relabeled as coming from Malaysia or Oman," said NPR. It is eventually "brought to small, private refineries in China," and the "willingness of such refineries in China to defy American sanctions on buying Iranian oil has been an economic lifeline for Tehran."

Oil is not the only product that China takes advantage of with its dark fleets; there are also "sophisticated networks propping up Chinese squid fleets accused of illegal fishing off South America," said Newsweek. These ships "operate in international waters for months — even years — at a time, virtually unmonitored, increasing the risk of illegal, unreported and unregulated (IUU) fishing and labor abuses."

But oil remains the biggest single factor in China's dark fleets. Despite heavy deterrents from the U.S., China is "still secretly buying Iranian oil and evading U.S. sanctions," according to a CBS News investigation. The "supply is Iran, the demand is China, and this mutually beneficial relationship" runs "off the coast of Malaysia in the Riau archipelago, an area the size of New York City." This oil trade "generated as much as $70 billion for Iran, propping up the regime and its nuclear weapons program."

China partakes in this practice because it "needs this fuel, which is discounted from international benchmarks, to supply its manufacturing sector and prop up its flagging oil refineries," said The Washington Post. But the poor condition of most of the dark fleet ships "increasingly threatens the safety of international sea lanes." China still "does not officially acknowledge that it imports sanctioned oil but defends its trade with countries such as Iran."

"As long as there's a supply, there will be a demand for this discounted oil," said Charlie Brown, a former U.S. Navy officer and current nuclear adviser, to CBS. China's particular hold on the Malaysian peninsula is "'dark fleet' parking central."