by Captain John Konrad (gCaptain) Irene Ang at Tradewinds is reporting that Kurow Shipping, a mysterious tanker company with ties to the Shadow Fleet of tankers transporting Russian oil has reportedly signed a contract for the construction of up to eight long-range Aframax product tankers with Zhoushan Changhong International Shipyard in China. The deal, worth nearly $500 million, represents Kurow’s first newbuild contract and, potentially, a marked escalation of China’s willingness to support shipping companies circumventing EU sanctions.
Read Irene Ang’s full investigative report at Tradewinds: Mysterious Kurow Shipping Steps out of the Shadows to order tankers in China
From Old To New
This marks a hard course change for the so-called “Shadow Fleet” which was previously known for utilizing aging vessels with dubious track records like the 26-year-old oil tanker Turba which Bloomberg recently found to operate under deficient safety and insurance standards, exemplifying the heightened environmental risk of these fleets, which have proliferated in the aftermath of EU sanctions on Russia. Rather than being decommissioned, Turba is part of a massive, clandestine fleet distributing Russian oil globally. This highlights potential hazards, as older, poorly maintained vessels can lead to catastrophic maritime accidents. Even though tankers are typically considered scrapped at around 15 years of age, current sanctions have increased the demand and freight rates, compelling shipowners to extend their service. The EU’s restrictions on Russian oil have not only resulted in increased long-distance deliveries to Asia but also catalyzed the creation of a shadow fleet operating outside the G7. These fleets typically employ older ships that do not meet normal insurance standards and conduct transfers in international waters outside the reach of port state inspectors.
Also Read: Aging Shadow Fleet Carrying Russian Oil Poses Disaster Risk
“The Turba is part of a huge ghost fleet of hundreds of uncredentialed vessels pressed into service by Moscow, which can no longer rely on Western companies to haul its oil,” said Admiral James Stavridis in a March editorial highlighting myriad risks surrounding the Shadow Fleet. “The international community needs to crack down on the new shadow fleet. It is not only permitting Putin to fund his illegitimate invasion; it is a ticking time bomb environmentally.”
The Kudlow Contract
The Kudlow contract is potentially concerning because it involves the construction of a new ship by a shipyard that’s heavily subsidized and under the control of the Chinese government. One crucial aspect that remains uncertain is whether these new tankers will be built to meet international safety standards or if corners will be cut to reduce costs. The reluctance of legitimate tanker companies to build new ships stems from a global shortage of yard availability and uncertainty surrounding new IMO emissions regulations. The latter may render any ships built today unsustainable after 2030.
Also Read: Russia’s Oil Tanker Ghost Fleet Is A Time Bomb by Admiral James Stavridis
While shipyard capacity may not be a concern if China prioritizes the construction of long-range tankers to meet its needs, there are potential challenges regarding the enforcement of new environmental regulations on Shadow Fleet tankers as it’s difficult to monitor and enforce these regulations for ships that never enter EU or North American waters.
On the other hand, the new tankers may offer a chance for Shadow Fleet operators like Kudlow to establish a legitimate presence. There are signs this could be their strategy, as a Tradewinds source close to Zhoushan Changhong verified Kudlow’s newbuild contract. The source further asserted that the ship will be constructed according to the rigorous American Bureau of Shipping (ABS) classification standards and will fully comply with the International Maritime Organization’s (IMO) Energy Efficiency Design Index standards.
Despite a lack of details on financing or deployment, one of Kurow’s recently acquired tankers has been associated with Russian oil trades.
Tradewinds reports the Kurow is a Marshall Islands-registered company with an address in Dubai, but shipbuilding sources in China identify it as having “Turkish roots“. Despite its recent entrance into the sector, Kurow has rapidly built a fleet of ten ships registered under special purpose vehicles in Hong Kong, and ties to a cluster of under-the-radar companies that is part of a growing “shadow fleet” carrying Russian oil exports. Full company details are scarce but this ambitious contract with the Chinese shipyard, which only recently diversified into tanker construction, hints to the scale of Kurow’s global operations.
The United States Needs Long Range Tankers Too
Amid escalating global tensions that impose ton-mile constraints on the worldwide energy system, it becomes evident that China and Russia are not the only nations facing a dire need for long-range tankers. The US Military is also grappling with this urgent requirement, albeit with a significant difference in the number of drydocks each country has to meet the shortage.
This is important because the U.S. Navy currently has a severe and critical need for the exact type of long-range product tankers being built by Kudlow Shipping in China. In the event of a serious conflict in the far west of the Pacific, the Department of Defense (DoD) is projected to require around one hundred tankers of various sizes, yet it currently has assured access to less than ten. This glaring lack of tanker capacity poses a major crisis in capability, especially considering the most advanced naval assets and ships, including nuclear-powered aircraft carriers, and US Air Force forward operating bases rely heavily on aviation fuel. Without sufficient tanker capacity, carrier air wings and strategic bombers would be severely constrained and rendered nearly unusable.
In a recent CIMSEC article published by gCaptain Captain Steve Carmel, Senior VP at Maersk Line Limited, highlighted that in the face of a broad conflict with China, reliable access to currently relied-upon oil sources in the region would likely be lost. As a result, the U.S. would need to manage exceedingly long supply lines to ensure oil reaches the forces in the increased quantities demanded during wartime. However, the international oil market is highly disrupted during conflicts, with numerous consumers competing for limited barrels. Additionally, China’s deep reach and increasing influence over the international oil market could further complicate access to oil for the U.S. military.
To address this critical issue, the U.S. would need a large number of tanker ships, particularly medium-range (MR) tankers for long-haul distribution and smaller, shallow-draft tankers for intra-theater lift. However, the current tanker crisis is compounded by the fact that shipyard capacity is strained in the U.S., with China possessing significantly more room to maneuver due to its larger shipyard capacity of around 23,250,000 million tons compared to less than 100,000 tons in the United States.
The U.S. Navy’s shortage of tanker capacity could lead to a dire situation where U.S. forces run out of fuel, significantly hampering their ability to operate effectively during a major conflict. While there are potential solutions, such as the Tanker Security Program (TSP) and implementing cargo preference on refined oil products being exported from the U.S., urgent and effective action is required to prevent a debilitating crisis in capability. Without a comprehensive and timely resolution to the tanker shortage, the U.S. Navy’s ability to project power and protect its interests in the Pacific could be severely compromised.
Shipyard Shortages In US And China
Both China and the US face strained shipyard capacities, with orders for newships nearing total capacity in both nations but there is a critical difference between these rivals as China’s shipyards are vastly larger and more efficient. This capacity disparity allows China more maneuverability when prioritizing ship types, such as long-range tankers, to meet their national security needs. In contrast, the majority of drydocks in the United States are dedicated to building warships, making it challenging to prioritize tanker construction without sacrificing critical warship production.
Considering that China’s navy has already surpassed the US Navy in terms of ship numbers and is rapidly closing the overall tonnage and technology advantage gap, the US Navy faces a complex dilemma that demands careful consideration of its strategic priorities.
U.S.-based shipbuilding capacity was in decline even before the end of the Cold War, but steadily shrunk even more afterward and is currently at low point, across the board. A recently leaked assessment of Chinese and U.S. shipbuilding capacities published by TheDrive reveals the shocking scope of this disparity, with China’s shipyards having a capacity of around 23,250,000 million tons, which is over 232 times greater than the roughly 100,000 tons of capacity in the United States. This difference has grown over time, largely due to the steady decline of naval shipbuilding contracts and rapid evaporation of commerical shipbuilding subsidize after the Cold War.
Projected sizes of both the U.S. Navy and China’s People’s Liberation Army Navy (PLAN) “battle forces” for the period 2020 to 2035 highlight an expanding gap. As of 2020, PLAN had 355 battle force ships, while the U.S. Navy had 296. By 2035, the figures indicate a widening gap with PLAN having 475 and the U.S. between 305 and 317.
Interestingly, the data also shows that naval production constitutes over 70 percent of China’s overall national shipbuilding revenue, as compared to an estimated 95 percent for the U.S. and this is not by acident. While the number of warships built has declined, the scope and influence of Naval shipbuilding as highlighted by the fact that NAVSEA, the shipbuilding and repair arm of the US Navy, now employs over 86,000 people making it almost the size of the entire US Coast Guard and Federal Aviation Administration combined!
US National Maritime Strategy
How large is the US Maritime Administration (MARAD), the government entity tasked with supporting all commercial shipyards and working on joint maritime strategy with the Department of Defense?
Just 800 and most work at the US Merchant Marine Academy or on projects beyond commercial shipyards. This organization is so understaffed it has not been able to publish a Shipyard Survey in almost two decades. This vast discrepency is unlikely to change without substantial intervention. Despite the mandate by Congress, members of the Joint Chiefs of Staff, the Secretary of Defense, and the Secretary of the Navy do not seem obliged or inclined to assist Secretary Pete Buttigieg’s Maritime Administration (MARAD) in crafting a comprehensive national maritime strategy.
The FY2018 NDAA ratified the Navy’s proposal for 355 ships as law.,” said retired 4-star Admiral James Foggo in a recent editorial. “Unfortunately, we have not achieved that number due to an undersized and overburdened industrial base. That begs the question, where is the comprehensive maritime strategy that assesses the threats along multiple axes, and then provides a force design to deter or defeat them?”
Each year, the development of this crucial strategy consistently fails to reach completion. Without this strategy, and without the highest tiers of government being held accountable for its creation, the U.S. is unable to harness the numerous economic and national security benefits that China has gained through the integration of military and civilian shipbuilding efforts. The situation will likely persist until Congress enforces accountability on the Pentagon, compelling it to support MARAD’s initiatives, report on progress, and collaborate with shipbuilders and the U.S. Merchant Marine.
Also Read: gCaptain OpEd: US Navy Shipbuilding Has A BIG Badger Problem
Allied Maritime Strategy
Even with a US National Maritime Security, however, China’s maritime advantages can’t be equated without considering a joint maritime strategy with U.S. allies. To achieve full effectiveness, the U.S. Navy, in collaboration with NATO partners, must formulate a strategy to optimally utilize shipyards across allied nations. Moreover, they need to establish programs that facilitate the exchange of technology, foster operational efficiencies, and promote worker mobility among shipbuilding nations. These nations, such as Japan, South Korea, and Germany, are grappling with escalating security concerns and a diminishing market share compared to China, making these initiatives all the more critical.
China is already stepping ahead on this front to as it works to strengthens influence at the IMO and among nations, like Panama, who are registering Shadow Fleet tankers.
Also Read: Naval Diplomacy: The Case For A Maritime G7
China’s naval fleet is already the largest in the world and continues to modernize with more capable designs, including a growing fleet of aircraft carriers, and it continues to find inovvative ways to use commercial ships (even cruise ships!) to meet national security challenges. The shipbuilding capacity figures and fleet sizes are influenced by China’s dual-purpose, state-run shipbuilding enterprise, which controls approximately 40% of the global commercial shipbuilding market.
The trend nonetheless points to effectiveness of China’s strong national maritime strategy and the widening gap between U.S. and Chinese capacities in both naval and commercial sectors. U.S. military officials, Congress members, and naval experts have expressed concerns about this gap and the potential threat it poses. There are also concerns about the sustainment of existing fleets, given the limited shipyard capacity in the U.S. The U.S. Navy is exploring ways to address these issues, including modernizing its shipyards and expanding the use of commercial yards for various types of work.
In the shifting landscape of global maritime trade and naval capabilities, the emergent strategies and robust shipbuilding activities of Kurow Shipping and China’s ‘Shadow Fleet’ signal a significant shift. Faced with crippling EU sanctions and rising global tensions, these entities are defying conventional practices, circumventing restrictions, and utilizing both old and now newly built tankers for global oil distribution. Their activities have sparked serious concerns over environmental safety and raised questions on the effectiveness of international safety standards and maritime laws.
Meanwhile, the U.S., despite its naval prowess, is grappling with a critical shortage of long-range tankers and strained shipyard capacities. These challenges are further aggravated the lack of a joint naval-commercial national maritime strategy and by the widening gap in naval fleet size and shipbuilding capabilities between the U.S. and China. The current scenario calls for the U.S. to reevaluate its strategic priorities, focusing not only on enhancing its naval fleet but also on boosting its commercial shipbuilding industry.
Yet, amidst these challenges, the potential for transformation exists. The U.S. military could leverage this crisis as a catalyst to reinvent its naval and maritime strategies. Congress could require the US Military to be held accountable for working jointly with MARAD. The US could utilize this as an opportunity to revise its approach towards naval shipbuilding, reconsider the role and resourcing of MARAD and US Coast Guard, and harness the synergy between military and civilian shipbuilding efforts, akin to China’s model.
However, this will require a substantial intervention from Congress, compelling the Pentagon to support MARAD’s initiatives and demanding joint accountability between Secretary Austin and Secretary Buttigieg. Until a comprehensive joint strategy is developed the U.S. will continue to struggle to harness the numerous economic and national security benefits of a thriving shipbuilding industry, while the shadow of China’s fleet looms larger on the global maritime horizon.
Also Read: Naval Diplomacy: The Case For A Maritime G7
In a world of escalating global tensions, the maritime domain will continue to play a crucial role in national security and economic prosperity. It is up to the US along with maritime allies to determine how it will navigate these choppy waters to secure its position in the increasingly contested global maritime space or stand by as the Shadow Fleet grows, Russian aggression and oil move in great quantities via the Black Sea, Chinese shipyards steal even more capacity from allies like Japan and South Korea, and Chinese interests further encroach on major seafarer nations like Ukraine and the Philippines.
Read Irene Ang’s full investigative report at Tradewinds: Mysterious Kurow Shipping steps out of the shadows to order tankers in China
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