The Dynamics of Evasion: The Price Cap on Russian Oil Exports and the Amassing of the Shadow Fleet
Diego S. Cardoso, Stephen W. Salant, and Julien Daubanes
March 2025
To reduce funds for Russia’s Ukraine invasion, Western governments imposed a price ceiling on Russian seaborne oil exports using Western services. To sell above that ceiling, Russia developed a “shadow fleet” which uses no such services. We use a calibrated model driven by this fleet’s expansion to assess various sanctions. While all sanctions reduce the present value of Russia’s profits, we find that the tighter the ceiling and the tighter the enforcement, the less harm sanctions impose, contradicting conventional wisdom based on Hotelling’s lemma. However, policies to reduce the shadow fleet’s size may increase the sanction’s effectiveness.
Keywords: Economic warfare; Sanctions evasion; Hotelling’s lemma
JEL codes: D04, L51, Q41