As of 2025, one of the notable developments in the field of international energy and security is the strict measures taken by strategic maritime nations such as Malaysia and Panama against sanctioned oil transportation. In particular, the illegal activities of so-called “shadow fleets”, aging tankers with low safety standards that often conceal their identity by changing flags, have prompted these countries to adopt tighter regulations.
The shadow fleet refers to a group of ships used to transport the products of countries unable to sell oil through official channels due to sanctions. These vessels often turn off or tamper with their Automatic Identification System (AIS) devices in order to make the detection of illegal cargo transfers more difficult. Such fleets gained visibility with the sanctions imposed on Iran in 2012 and Venezuela in 2019, though their activities date back much earlier.
These vessels are preferred due to their low cost; however, their aging nature brings environmental and safety risks. At the same time, such activities constitute a clear violation of international law, undermine the effectiveness of sanctions, and fuel illegal financial networks.
Malaysia, particularly due to its geographic proximity to the Singapore Strait, has long been a central hub for offshore ship-to-ship transfer operations. However, in 2025, authorities seeking to curb this situation established a comprehensive regulatory framework through the Malaysian Maritime Department (MMD) and the Malaysian Maritime Enforcement Agency (MMEA). According to the new regulations, ship-to-ship transfers may only be conducted in designated authorized areas and with official approval from the MMD. Additionally, it has been made mandatory to keep AIS devices operational at all times. Vessels that fail to comply with these rules and carry out unauthorized transfer operations will be subject to detention, which may last several weeks if detected.[i] These regulations are not solely based on environmental or maritime safety concerns; they also represent a clear political determination to prevent attempts to evade sanctions.
Panama, the world’s largest “open registry” country, has long attracted attention for its low level of oversight and high volume of ship registrations. However, as of 2025, amid increasing international pressure concerning sanctioned oil trade linked to Iran and Venezuela, Panama has decided to refuse the registration of tankers over 15 years old. Accordingly, in addition to aging tankers, the registration of bulk carriers and general cargo ships has also begun to be canceled. At the same time, all ships registered in the maritime registry are now required to undergo regular inspections every three months, and control mechanisms over safety management systems have been tightened. Within this framework, in the first half of 2025 alone, 214 vessels, most of which were connected to sanctioned cargo, were removed from the registry.[ii]
The United States (US) Federal Maritime Commission welcomed Panama’s initiative, while Panamanian authorities described the step as an effort to align the fleet with international standards by focusing on quality rather than quantity.[iii] However, the extent to which all these measures will be effective in the medium and long term, and how much they will weaken illegal maritime trade networks, remains a subject of debate.
Looking at the history of international sanctions, it is evident that similar oversight efforts have often had limited impact. Examples from Rhodesia in the 1970s, Libya in the 1980s, Iran in the 2000s, and more recently North Korea, clearly demonstrate how illegal trade can persist through various evasion methods. These methods include the use of shell companies, ships concealing their identities through flag changes, “cargo triangulation” via intermediate transfers in third countries, turning off or transmitting false signals from AIS devices, falsifying documents, and favoring ports with weak oversight. Therefore, while the measures taken by Malaysia and Panama provide a certain level of deterrence, they are more likely to redirect shadow fleet activities to new ports and less regulated registry centers rather than completely terminating these networks.
The effectiveness of such sanctions in maritime trade becomes unsustainable if they remain limited to unilateral regulations by certain countries. Otherwise, illegal operations can easily shift to less regulated ports or to open waters outside the exclusive economic zones of these countries. Indeed, as seen in recent examples, shadow fleet activities are already reorganizing off the coasts of Indonesia, the United Arab Emirates (UAE), and Greece. This situation demonstrates that sanctions must be implemented in a coordinated manner not only regionally but also globally.
For sanctions to be effective, multiple elements must operate simultaneously. First, establishing an effective intelligence-sharing mechanism through international institutions (such as the IMO, INTERPOL, and the United Nations) would be beneficial. Additionally, stringent oversight in maritime insurance and the financial sector would be a prudent approach; major insurance organizations such as Lloyd’s could be prevented from providing direct or indirect support to shadow fleet activities. At the same time, with active cooperation from port authorities, port services for high-risk and suspicious vessels should be restricted or entirely denied. Beyond all this, the obligations of flag states, port states, and coastal states must be harmonized to complement each other, ensuring coordinated action within the framework of international law.
In this context, the European Union’s (EU) ban on insuring sanctioned vessels and the expansion of the U.S. Treasury Department’s sanction lists targeting ships involved in ship-to-ship transfer activities stand out as notable examples of international cooperation.
The measures taken by Malaysia and Panama may create meaningful deterrence against illegal trade in the global energy market. However, historical examples demonstrate that shadow fleets are flexible, adaptive, and often linked to complex networks involving non-state actors. Therefore, achieving success requires focusing not only on the vessels themselves but also on the insurers, port operators, and state-backed shell companies that facilitate these activities.
In conclusion, maritime sanctions can only be effective through multi-actor, coordinated, and continuously updated oversight mechanisms. The steps taken by Malaysia and Panama can be considered important initial measures in this direction. However, the complete elimination of the shadow fleet does not appear feasible in the short term.
[i] Ruiz, Luis Alejandro, “Malaysia and Panama Take Action Against Sanctioned Oil Transport”, Guacamaya, guacamayave.com/en/malaysia-and-panama-take-action-against-sanctioned-oil-transport/, (Access Date: 10.08.2025).
[ii] Ibid.
[iii] Ibid.
