Energy / Politics

Russia’s Shadow Fleet Has an LNG Problem: The U.S. Should Put Pressure on It 

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Executive Summary 

  • To evade sanctions and fund its war against Ukraine, Russia uses a “shadow fleet” of ships, mostly to transport crude oil. Building a similar fleet for liquefied natural gas (LNG) is harder because it requires specialized ships and terminals.  
  • Russia’s Arctic LNG shipping accounts for roughly two-thirds of its seaborne LNG exports, making it a key vulnerability. The U.S. and its allies should target Russia’s access to specialized ice-class LNG carriers and third-country companies that support sanctioned LNG projects. 
  • The EU will ban Russian LNG under long-term contracts starting January 1, 2027. The U.S. should expand LNG exports, giving Europe alternatives to Russian supply and reducing Moscow’s ability to replace lost European sales. 

Introduction 

Russia expects $90 billion in oil and gas earnings in 2026, accounting for about a fifth of its state budget revenues. U.S. and European sanctions have targeted this income stream, a key source of funding for Moscow in its war against Ukraine. Russia has adapted by assembling a large network of tankers called the “shadow fleet.” These vessels use third-country ownership, tracking evasion techniques, non-Western insurance, and ship-to-ship transfers to bypass sanctions. The shadow fleet has helped reroute Russian crude exports from Western countries to markets primarily in China and India. 

Russia’s shadow fleet has mainly transported crude oil, so Moscow is now trying to apply the same model to liquefied natural gas (LNG) shipping. Russia has acquired older LNG carriers, used ship-to-ship transfers, and found buyers for sanctioned cargoes, primarily in China. Yet expanding a shadow LNG fleet is considerably harder than an oil one. LNG must be stored at minus 260 Fahrenheit (minus 162 Celsius), requiring specialized carriers and terminals. Russia’s Arctic LNG projects face another constraint: they rely on ice-class carriers and nuclear-powered icebreakers. Arctic LNG makes up roughly two-thirds of Russia’s total seaborn LNG exports. 

Russia’s reliance on Arctic shipping gives the United States and its allies significant leverage. The European Union is preparing to end Russian LNG imports under long-term contracts in January 2027, and it fully banned LNG short-term and spot imports in April 2026. In Q2 2026, Russia supplied over 17 percent of the EU’s LNG imports. This creates a timely opportunity for U.S. LNG exports to fill part of the EU’s LNG demand gap.  

LNG generates far less revenue for Russia than crude oil: an estimated $50 million per day compared with $392 million from crude. It, nevertheless, remains a meaningful source of export revenue that can be choked off. U.S. policymakers should pursue two objectives: targeting the parts of Russia’s LNG supply chain that are hardest to replace and expanding U.S. supply options for Europe and other allies. 

LNG is Harder to Move Outside Western Markets 

In response to Russia’s invasion of Ukraine, the G7 countries imposed a price cap per barrel of Russian crude oil. If Russia sells oil above that price, Western insurers and shippers are not allowed to move or finance that oil. Russia responded by buying older tankers, transferring carriers to third-country owners, and operating outside Western insurance and services. About 150 such “shadow” tankers carried Russian oil products in August 2026 alone. Because oil tankers are widely available on the secondhand markets and serve more buyers, Russia can expand its fleet quickly. 

The same approach, however, is harder to replicate with an LNG shadow fleet. The secondhand market for LNG carriers is considerably smaller than that for oil tankers, and LNG ships also need dedicated export and import terminals. These challenges are even greater for Arctic LNG. Arctic exports require specialized ice-class carriers and icebreakers. The United States sanctioned the Russian Arctic LNG 2 project in 2023. Combined with other Western sanctions, this has constrained Arctic LNG 2’s output and access to Western-built Arctic-class tankers.  

Russia has a shortage of vessels needed to serve Arctic LNG 2. That shortage is the crucial difference between the two shadow fleets: specialized LNG carriers are far harder to acquire than aging oil tankers. 

Russia is Adapting 

Russia’s LNG shipping plan relied on a fleet of Arc7 LNG carriers that can break through thick Arctic ice, but sanctions disrupted its access to foreign shipbuilding and maintenance. Russia has nonetheless expanded its LNG shadow fleet to 25 vessels in the past six months, including at least eight secondhand carriers and two domestically built ships. Four additional carriers currently remain under construction in Russia. These ships have also borrowed tactics from the oil shadow fleet, such as tracking manipulation, changes of ownership, and ship-to-ship transfers. During ship-to-ship transfers, two vessels pull alongside each other at sea and pump cargo through a hose. This lets ordinary carriers take gas from the few ice-class ships while hiding its Russian origin from ports and inspectors. 

Significant gaps in Western sanctions have also given Russia some leeway. A major European facility in Denmark continues servicing Russia’s Arc7 fleet, while Greece secured a renewable one-year exemption to the EU Russian LNG ban. The exemption will allow European shipping companies to keep transporting Russian LNG to non-EU countries even after January 1, 2027. These gaps can preserve Russian export revenue and access to Western services that are difficult to replace. 

How to Target Russia’s Bottlenecks 

The United States should focus on the parts of Russia’s LNG supply chain that Moscow cannot quickly replace. The most important bottleneck is Russia’s access to ice-class carriers and shipyards that build, maintain, and service them. Blocking the buying, construction, or servicing of ice-class LNG carriers would significantly constrain Russia’s Arctic exports.  

The U.S. and its allies should also prevent Russia from acquiring secondhand LNG carriers. The EU’s July 2026 sanctions package, for instance, introduced a notification requirement for the sales of LNG tankers to Russian citizens and companies. The State Department should similarly continue targeting third-country managers, owners, and suppliers that support sanctioned Russian LNG capabilities. The remaining sanctions gaps, such as European servicing of Russian Arc7 carriers, should also be closed right away.

U.S. Can Help Replace Russian Supply 

The EU remains the largest buyer of Russian LNG, accounting for almost half (49 percent) of its exports. The EU has already prohibited Russian LNG imports under short-term contracts, and the ban extends to long-term LNG contracts beginning January 1, 2027. It will still allow EU companies to transport Russian LNG to non-EU third countries under specific preexisting contracts. Russia will have to redirect more LNG to buyers in Asia, increasing logistics costs and putting additional pressure on its LNG fleet. 

The United States is already the world’s largest LNG exporter. The Energy Information Administration estimates that U.S. LNG exports rose 23 percent in the first half of 2026. Exports will continue to increase as five new LNG export projects come online by the end of 2027. Russia, meanwhile, lowered its 2026 LNG export forecast to 35 million metric tons, down by 5.3 million tons, amid sanctions and logistics constraints. Growing U.S. capacity gives Europe a more reliable option as Russian supply leaves the EU markets. 

Congress has also considered options to increase U.S. LNG exports. The House-passed Unlocking our Domestic LNG Potential Act of 2025 (H.R. 1949) bill would transfer federal authority over natural gas import and export approvals from the Department of Energy to the Federal Energy Regulatory Commission (FERC). The Congressional Budget Office concluded that the legislation could allow some LNG facilities to begin operating sooner. FERC permitting reform can also help speed up the buildout of LNG facilities, making maintenance, repairs, and upgrades more efficient.  

Combining targeted sanctions on Russia’s hardest-to-replace LNG shipping and technology with expanded U.S. LNG exports would make it more challenging for Moscow to replace lost European sales. It would also give Europe a more reliable source of supply and increase pressure on a revenue stream that helps fund Russia’s war in Ukraine.