In this article, Pole Star Global explains recent developments in Russian sanctions news, ensuring that key stakeholders within the maritime industry remain compliant and informed.
November 2023 marks a significant step by the United States in restricting oil revenues to Moscow since Washington and its allies imposed the initial price cap in December 2022.
The U.S. Treasury Department has issued notices to ship management companies, requesting details on 100 vessels suspected of breaching Western sanctions on Russian oil.
The global oil trade is a complex and ever-changing landscape, presenting a significant challenge for both oil and ship management companies with the risk of sanctions. Western countries have imposed several sanctions on Russia in response to its invasion of Ukraine, which impacts the global oil trade.
For example, services such as transportation, insurance, and financing of Russian oil sold above the price cap of $60 per barrel is prohibited. However, in the past, regulators expressed concerns that disrupting Russia’s vast flow of petroleum could drive up global prices. For instance, after Russia’s invasion of Ukraine last year, oil prices reached $140 per barrel. This surge has caused a substantial portion of Russian oil to trade beyond the established cap, with European government officials reporting that “almost none” of Russian oil is sold below $60 per barrel.
This inadequate enforcement of sanctions has been strongly addressed under the recognition of Moscow’s rising oil revenues. For instance, calculations by Reuters inferred revenues in September were up by 14% from the previous month. Funding the continued war in Ukraine, these revenues are becoming harder to ignore.
The Office of Foreign Assets Control (OFAC) has issued these notices to companies across 30 countries.
The goal of these investigations is to clamp down on price cap violations, ensuring that Russian oil exports are traded below $60 per barrel. This measure restricts oil revenues that fund the ongoing war in Ukraine.
“While we do not confirm or comment on investigations or enforcement actions, Treasury is committed to enforcing the price cap and reducing Russia’s resources for its war against Ukraine” - Ukrainian World Congress, stated by a Treasury spokesperson
The U.S. Treasury Department has issued a flurry of letters to tanker companies worldwide suspected of breaching the western (G7) price cap on Russian oil trades. A strong caution was issued, indicating that non-compliance might lead to imprisonment. This stark change in regulatory tone comes in reaction to Moscow’s rising oil revenues funding the continued war in Ukraine.
A copy of one of the letters indicates that a few tankers operated by a particular company could have potentially transported Russian cargo exceeding the price cap. The letter requested comprehensive information and documentation regarding the shipments and the entities associated with them. It explicitly stated that failure to disclose the requested information “may result in criminal fines, imprisonment, or both.”
Russian oil companies are using various methods to evade sanctions. One common method is the use of ship-to-ship transfers to blend Russian oil with oil from other countries. This makes it difficult to track the origin of the oil and determine whether it’s subject to sanctions.
Another method involves selling oil to non-Western countries, such as China and India, at a discounted price, as these countries are not subject to Western sanctions.
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