The demolition of a shadow fleet tanker flagged under Comoros has hit a legal roadblock in India. The vessel, initially arrested after a failed transaction, was headed for scrapping but is now the subject of a legal petition seeking to cancel the deal. This case sheds light on the increasing complications surrounding the disposal of sanctioned vessels and the risks faced by buyers and ship recyclers alike.
Sanctions Disclosure Dispute Halts Demolition
The tanker was barred from entering an Indian port and subsequently redirected for demolition at a shipbreaking yard. However, a legal petition filed by the purchaser alleges that the seller failed to disclose the vessel’s sanctioned status—something flagged by multiple international authorities including those from the UK, EU, Australia, and Canada.
Despite an advance deposit, customs and port fees paid, and a demolition contract signed, the final payment was blocked by the bank due to sanctions. The seller allegedly denied the existence of such restrictions and tried to pressure the buyer to proceed. In response, the buyer is seeking to void all agreements and recover its payments with interest.
Risks and Realities of Grey Fleet Scrapping
Shipbrokers note that it is often difficult to extract tankers from the so-called “grey fleet”—a network of vessels operating in the shadows of sanctions—unless they are sold within the same ecosystem. Cash buyers and demolition yards typically use U.S. dollars, which increases their exposure to future sanctions if involved in such transactions.
As global ship demolition rates remain sluggish, some recycling yards—facing a shortage of incoming vessels—have been willing to accept grey tonnage, usually at a discount. Between 2024 and 2025, data shows that 15 such ships were scrapped, with over half having links to sanctions. However, if demolition activity picks up in conventional shipping segments, the appetite for risky grey fleet tonnage is expected to decline sharply.
This unfolding case highlights the mounting legal, financial, and regulatory risks involved in scrapping sanctioned vessels. It serves as a cautionary tale for buyers, recyclers, and financial institutions alike, reinforcing the importance of due diligence in maritime transactions. As scrutiny of shadow fleet operations intensifies, both regulators and industry players must navigate a complex landscape marked by hidden ownerships, geopolitical tensions, and evolving enforcement actions.
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Source: MARINE INSIGHT
