Harry Reitman — July 28, 2026
Four years into the invasion of Ukraine, Russia still hasn’t run out of money to fight. Western governments have thrown a lot at trying to change that: a G7 price cap on Russian crude, a tanker blacklist that now runs past 632 vessels, direct sanctions on Russia’s two biggest oil producers, and a growing list of restrictions on the financial rails Moscow uses to get paid. None of it has been painless. Russian oil and gas revenue fell nearly 50% year-over-year in January and February 2026, and by the end of the first quarter the federal deficit had already blown past the government’s full-year target.
But the oil keeps moving, and the money keeps arriving. Three systems are doing most of the work. A fleet of aging tankers with no real ties to Russia on paper carries most of the country’s crude exports around the price cap. India and China keep buying that oil at a discount even as sanctions squeeze the supply chain around it. And a newer piece, a Russian-linked stablecoin, has given sanctioned firms a way to settle payments that doesn’t touch a Western bank at all. This report looks at each one, what the actual data says about how well they’re working, and where the strain is starting to show.
Shadow Fleet
Marine insurers who follow Western sanctions rules won’t cover most of the tankers now carrying Russian crude. Instead, several hundred vessels move that oil under flags from small maritime registries like Cameroon, Russia itself, and Sierra Leone. According to the Kyiv School of Economics Institute’s Russian Shadow Fleet Tracker, those three flags alone accounted for 61% of shadow-fleet crude volumes in April 2026, and 75% of the crude oil tankers active that month were classified as shadow-fleet vessels. Russia’s own flag has become one of the fastest-growing registries in the fleet. Its share of shadow-fleet volume climbed from just 3% in May 2025 to 23% a year later. A domestic flag also means Russia doesn’t need a foreign registry’s cooperation to keep a tanker on the water.
Exporters didn’t have many good options once the G7 capped Russian crude at $60 a barrel in December 2022. They could keep shipping through insured, Western-linked tankers and accept the lower price, or route the oil through less scrupulous channels instead. Most went with the second path, and ownership of the resulting fleet tends to run through layers of shell companies. Analysts at the Kyiv School of Economics Institute have estimated Russia has spent over $10 billion building this fleet since 2022, and insurance behind these vessels is frequently absent, fake, or issued by insurers with no real capacity to pay out a claim.
How big the fleet actually is depends on who’s counting and what gets included. Ukraine War Analytics put the core fleet at 400 to 600 tankers in its March 2026 assessment. Broader estimates that also track vessels evading Iran and Venezuela sanctions run past 1,400. Both counts point toward the same underlying shift: these ships are carrying a bigger portion of Russia’s exports than they were a year ago.
Russian Urals crude has traded at a discount of $8 to $25 per barrel against Brent since 2022. Analysts at The Board have put the per-voyage value of that gap at $16 million to $50 million. Formal seizures remain rare against a fleet this size. A tanker owner can lose a ship once or twice a year to enforcement and still come out ahead financially. Operators have responded by getting harder to track. Some switch off automatic identification system (AIS) transponders to “go dark.” Others move cargo ship-to-ship in open water, or swap flags and ownership records once a registry starts asking questions.
That last tactic showed up clearly in the case of the tanker Smyrtos. British forces boarded the vessel in the English Channel on June 14, 2026, in what the Ministry of Defence described as the UK’s first interdiction of its kind, using Royal Marine Commandos, National Crime Agency officers, and Chinook helicopter support, in coordination with French authorities. According to maritime intelligence outlet Lloyd’s List, the Smyrtos had loaded 101,400 tonnes of Urals crude at the Russian port of Ust-Luga on June 5 and had been flying Cameroon’s flag since December, after previously sailing under Gambia’s registry. Cameroon had quietly struck the ship from its registry on May 25, weeks before the interception. That left the tanker technically sailing with no valid flag at all when it was stopped. The vessel had been under EU and UK sanctions since October 2025.
Sweden has run a similar string of boardings in the Baltic. In May 2026, its Coast Guard intercepted the tanker Jin Hui off Trelleborg, the fifth such intervention in a short stretch, after the ship’s Syrian flag registration raised red flags with inspectors; Swedish Prime Minister Ulf Kristersson framed it as part of a broader crackdown that had already produced boardings of vessels flying Comorian and Guinean flags earlier the same year. Regulators have moved on the policy side as well. The EU’s 20th sanctions package went into effect on April 23, 2026, and added 46 vessels to bring the total blacklist to 632. It also introduced mandatory due-diligence checks on tanker sales. For the first time, the EU activated its anti-circumvention tool against a specific country over this issue, naming Kyrgyzstan, whose exchanges keep surfacing on the crypto side of this story too.
Vessels that get hit with sanctions rarely disappear from the trade for good. A ship gets pulled from its registry, picks up new ownership papers, and turns up months later flying a different flag under a different name, a pattern that’s shown up repeatedly in the boardings described above.
Buyers
India has become the largest single destination for discounted Russian crude, and it isn’t close. Through the first nine months of 2025, Russian-origin oil made up roughly a third of India’s total crude imports, averaging about 1.7 million barrels a day. Part of the appeal comes down to refining capacity, since Indian plants are built to process the same heavy, sour crude that Russia and Venezuela both export. The rest comes down to price. Trump made those purchases the center of a tariff fight in early 2026: he’d already stacked a punitive 25% tariff on top of a separate 25% “reciprocal” tariff specifically over India’s Russian oil buying, and in February he announced a deal cutting the combined rate to 18% in exchange for what he said was Modi’s agreement to stop the purchases and buy more from the US and, potentially, Venezuela instead.
Modi never actually confirmed that part of the deal in public. His own statements welcomed the tariff relief without mentioning an end to Russian oil purchases, and analysts were skeptical from the start that India would really walk away. Atlantic Council fellow Michael Kugelman wrote at the time that India was “highly unlikely” to give up cheap Russian crude for economic, diplomatic, and strategic reasons tied to the broader relationship with Moscow.
What actually moved the needle wasn’t the tariff deal. It was sanctions. On October 22, 2025, the US Treasury sanctioned Rosneft and Lukoil directly, putting roughly 1.2 million barrels a day of India’s direct Russian imports at risk once the wind-down deadline hit on November 21. Reliance Industries, India’s largest private refiner and a major Rosneft counterparty, said it would fully comply, and state refiners including Mangalore Refinery and HPCL-Mittal Energy announced plans to suspend Russian intake as well. Kpler’s own analysis at the time projected the disruption would prove temporary, with volumes gradually re-normalizing through less sanctioned intermediary traders. The timing lines up: India’s Russian imports have since drifted down, and the pattern in the drop tracks the Rosneft/Lukoil sanctions far more cleanly than it tracks Modi’s disputed February pledge.
China has taken the opposite approach. Instead of pulling back, it’s used Russia’s shrinking pool of buyers as leverage to squeeze deeper discounts of its own. Chinese customs data from late 2025 showed Russian LNG imports jumping 76.7% year-over-year to an all-time monthly high, with analysts pointing to steep discounting as a key driver; separately, Novatek reportedly cut prices by 30% to 40% on Arctic LNG 2 cargoes specifically to get sanctioned gas moving to Chinese buyers at all. Deputy Prime Minister Alexander Novak has repeatedly signaled Moscow’s willingness to sell more to both China and India on request, telling reporters in March that Russia is “always ready” to increase supply if it’s purchased. With India and China now absorbing most of what’s left of Russia’s export market, Russia has lost much of its ability to set its own price.
Crypto
The newest piece of Russia’s financing setup has nothing to do with ships. It runs through a ruble-pegged stablecoin called A7A5, launched in early 2025 by a Moscow-based financial network called A7. A7 is majority-owned, at 51%, by Ilan Shor, a Moldovan businessman. A Moldovan court convicted him in 2017 for his role in the theft of roughly $1 billion from the country’s banks in 2014. He left Moldova before the case was resolved on appeal. Moldovan courts later sentenced him in absentia. Russia took him in afterward and has since granted him citizenship. Promsvyazbank, the Russian state bank that primarily serves the country’s defense sector, holds most of the remaining stake in A7. A7A5 itself is registered in Kyrgyzstan and, crucially, was built without a freeze function, a design decision made specifically in response to Tether’s earlier freezing of wallets connected to the sanctioned exchange Garantex.
How much money has actually moved through it depends heavily on which report you read, and the honest answer is that the figures are genuinely disputed. Elliptic documented $8 billion in stablecoin transactions tied to the A7 network in the eighteen months before September 2025. TRM Labs’ 2026 Crypto Crime Report attributed more than $72 billion in sanctions-related flows to A7A5 specifically in 2025. Chainalysis, measuring differently, put cumulative transaction volume above $93 billion in under a year. The token’s own issuer has claimed even higher figures, $34.4 billion in the first half of 2026 alone. But Elliptic and TRM Labs, tracing the transactions wallet by wallet, found that roughly a third of that reported volume looks circular: tokens shuffling between related wallets in patterns consistent with wash trading rather than real trade settlement. After the collapse of Grinex, the exchange that had served as A7A5’s main trading venue, monthly volumes reportedly fell by as much as 96% from their peak. So while headline totals in the tens of billions get repeated constantly, the actual scale of real economic activity moving through A7A5 is smaller and considerably murkier than the biggest numbers suggest.
Whatever its true size, investigators say the network isn’t limited to currency conversion. TRM Labs and the Royal United Services Institute have tied A7-linked wallets to firms that supply electronics and dual-use components across China, Southeast Asia, and South Africa. Those components reportedly feed into Russian weapons production, from missiles to drones to armored vehicles, which points to crypto as one route for sourcing Western-made parts despite export controls. But the response from regulators hasn’t kept pace with what investigators have found. The UK’s Office of Financial Sanctions Implementation designated the Kyrgyzstan-based exchanges Grinex, Old Vector, and Meer over their roles in the network, and the EU’s 20th package activated its anti-circumvention tool against Kyrgyzstan directly for the first time. Kyrgyzstan itself has shown little appetite to shut the schemes down, and A7A5’s own compliance officer has publicly maintained the company isn’t breaking any Kyrgyz law.
Russia, for its part, has stopped trying to keep any of this quiet. On July 21, 2026, the State Duma passed a bill creating the country’s first state-licensed framework for crypto exchanges and brokers, set to take effect September 1. The law permits crypto settlements with foreign trading partners while keeping domestic crypto payments restricted, a structure that makes its intended audience fairly obvious: companies looking for a way around the dollar-based financial system, not ordinary Russians paying for groceries. Legalizing the practice doesn’t change what the underlying transaction data already shows, whatever cover it gives Moscow going forward.
Overall Finances
None of these three systems have spared the Russian budget from real pain. In the first two months of 2026, oil and gas revenue fell nearly 50% year-over-year. The deficit for that same stretch widened to 3.45 trillion rubles, or 1.5% of GDP, against a full-year target of 3.8 trillion rubles. By the end of the first quarter, energy revenue was still running 45% below where it stood a year earlier. The deficit had already blown past the government’s entire annual target, with nine months of the year still remaining. Sanctions on Rosneft and Lukoil made the price problem worse still, pushing Urals to trade at a wider discount and briefly dropping Russia’s realized price well below the $60 baseline built into its own budget assumptions.
And yet Russian crude production has barely moved. Russia continues exporting the large majority of what it produces regardless of price, which points to what these three systems were actually built to do. None of them were designed to protect Russia’s profit margins, and by that measure they’ve clearly failed; margins are getting squeezed harder every quarter. What they’ve protected is volume. Oil keeps leaving Russian ports, buyers keep showing up on the other end, and money keeps moving through channels the West can’t easily freeze, even as the price Russia gets for each barrel keeps falling.
Conclusion
All three systems have proven more durable than Western sanctions designers likely expected when the price cap first went into effect. The shadow fleet keeps oil physically moving even as the ships involved get older and the paper trail behind them gets murkier. India and China guarantee there’s a buyer on the other end no matter how deep the discount gets. And a ruble-backed stablecoin, however inflated its headline numbers might be, has given Russia at least a partial way to settle cross-border payments without a Western bank in the loop. Each system has drawn its own countermeasures: tanker seizures, direct sanctions on Rosneft and Lukoil, designations against crypto exchanges. And each has adapted around them anyway, through reflagging, discount renegotiation, or simply standing up a new exchange under a new name after the old one gets shut down. Whether Russia’s fiscal strain eventually forces a real change in how it prosecutes the war, or whether these systems just keep absorbing sanctions indefinitely, may end up shaping how this conflict resolves as much as anything that happens on the battlefield.
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Alice Johnson, International Bar Association
Gary Howard, Seatrade Maritime News
Lucy Pakhnyuk, Kyiv Independent
