For all the moral grandstanding that accompanied Europe’s sanctions against Russia and Iran, it appears the system is riddled with loopholes — and not just the technical kind.
A Reuters investigation has uncovered that a small New Zealand insurer, Maritime Mutual, has quietly enabled hundreds of tankers to move sanctioned oil, with many of those shipments bound for or transiting through European waters. It is a scandal that raises a deeply uncomfortable question: is the EU unable, or simply unwilling, to enforce its own embargoes?
Between 2018 and 2025, Maritime Mutual provided cover for 231 vessels carrying sanctioned oil, of which 97 were themselves blacklisted by Western authorities. These ships formed part of the so-called “shadow fleet” — a web of phantom tankers using false ownership records, spoofed GPS signals, and ship-to-ship transfers to disguise the origin of their cargo. With insurance in hand, many of these vessels passed through European ports, ostensibly under the radar of EU enforcement.
Brussels’ bark, but little bite
The European Union prides itself on being the world’s great regulatory superpower. It drafts rules on everything from data privacy to fishing quotas, often with exacting precision. Yet when it comes to sanctions enforcement, Brussels’ rhetoric collapses into impotence.
The EU’s sanctions framework against Russian oil — introduced in late 2022 — ostensibly bans the import or transport of crude above the G7’s price cap. In practice, enforcement is delegated to member states, and the result has been predictably uneven. Greece, Malta and Cyprus continue to host the world’s largest fleets of oil tankers, and each has shown varying enthusiasm for inspecting or banning suspicious ships.
When confronted with evidence of illicit cargoes, European port authorities have often looked the other way, citing “jurisdictional ambiguity.” As one EU diplomat admitted privately this summer, “If a ship has paperwork from a recognised insurer, even if it’s obviously questionable, the port will wave it through. No one wants the legal risk of detaining it.”
That “questionable” paperwork has often come from Maritime Mutual — a company based 12,000 miles away in Auckland, operating beyond the direct reach of EU law but instrumental to the smooth functioning of the shadow trade.
How the loophole works
Under maritime law, vessels must carry Protection & Indemnity (P&I) insurance to dock in most ports. Large global insurers — typically members of the International Group of P&I Clubs — refuse coverage for sanctioned cargoes. But smaller, lightly regulated firms have stepped in to fill the void.
Reuters’ analysis shows that Maritime Mutual insured ships carrying at least $35 billion worth of sanctioned crude. In some cases, it continued coverage even after ships were officially blacklisted. One example, the Fenghuang, began receiving cover from the company just days before being sanctioned; another, the Sunsea, remained insured months after its blacklisting.
The insurer insists these were “administrative errors,” but the pattern is too consistent to dismiss as clerical oversight. And it was precisely this kind of plausible deniability that allowed the system to endure.
Because Maritime Mutual’s paperwork appeared legitimate, EU ports accepted it at face value. Customs officials, reluctant to challenge insurers headquartered in foreign jurisdictions, allowed the ships to discharge their cargo — crude that eventually made its way into refineries in Asia, the Middle East, and, indirectly, back into European markets.
Europe’s quiet complicity
The uncomfortable truth is that Brussels has tolerated this grey-market trade because it serves economic convenience. While the European Commission thunders about moral duty and “energy independence,” the continent’s refineries quietly benefit from the steady global flow of oil — even if that flow is sustained by shadowy intermediaries.
The EU has announced nearly a dozen “sanctions packages” against Moscow and Tehran since 2022. Yet enforcement mechanisms remain paper-thin. There is no central European sanctions authority; no unified maritime taskforce; and, crucially, no appetite among member states to police each other’s compliance.
Malta, for instance, still registers dozens of tankers under its flag that conduct opaque transfers in the Mediterranean. Greek shipping firms, many operating through offshore entities, continue to transport oil on behalf of intermediaries linked to Russian companies. And while Brussels talks tough, fines or prosecutions for sanctions evasion are vanishingly rare.
The result is a kind of performative sanctions regime: publicly punitive, privately permissive. The EU gets to boast of moral superiority while the machinery of global commerce continues largely undisturbed.
The geopolitical cost of hypocrisy
Europe’s credibility is suffering. In Washington and London, officials privately complain that Brussels is quick to draft lofty declarations but slow to act when enforcement might disrupt trade. Moscow and Tehran, for their part, have learned that they can game the system with ease — so long as they route their exports through compliant jurisdictions and small-scale insurers.
The episode also undermines the Global Gateway initiative, Brussels’ flagship answer to China’s Belt and Road, which hinges on promoting “transparency and rule of law.” How can the EU preach global governance reform when its own sanctions enforcement collapses under modest scrutiny?
Even within Europe, frustration is mounting. Nordic and Baltic governments, which have borne the brunt of Russian grey-market shipping in the Baltic Sea, are calling for an EU-wide sanctions agency akin to America’s Office of Foreign Assets Control (OFAC). But southern member states, dependent on shipping and maritime services, have resisted such centralisation.
New Zealand’s reckoning, Europe’s shame
Maritime Mutual now faces inquiries from New Zealand’s Financial Markets Authority, which is examining whether the company violated anti-money-laundering and sanctions laws. Yet even if Auckland acts decisively, that will do little to repair the reputational damage already done — not just to New Zealand, but to Europe.
After all, it was the EU’s lax enforcement environment that allowed these ships to dock, discharge, and disappear. A functioning regulatory union would have flagged every Maritime Mutual-insured vessel the moment its name appeared on a blacklist. That didn’t happen, because the system wasn’t designed to work that way.
The illusion of moral authority
Europe’s leaders continue to speak of “strategic autonomy” and “values-based diplomacy.” But sanctions without enforcement are not strategy — they are theatre. Every sanctioned barrel of oil that slips through the EU’s ports, underwritten by obscure foreign insurers, is a reminder of that hypocrisy.
If Brussels wishes to reclaim its moral standing, it must first show that it can police its own markets. That means a unified sanctions enforcement body, mandatory transparency for shipping registries, and real penalties for member states that tolerate evasion.
Until then, Europe’s sanctions will remain what they have quietly become: a bureaucratic illusion sustained by moral rhetoric and economic self-interest — a system that lets others do the dirty work while pretending to keep its own hands clean.
Risk in European Waters: The Shadow Fleet, Sanctions Evasion and Safety Gaps
