G7 crackdown on Russian oil shipping breaches begins
An advisory for the maritime oil industry and related sectors was issued today. It was accompanied by recommendations on how to identify deceptive shipping practices carried out by the ‘shadow fleet’
Two sanctions-busting tankers, including one owned by Russian-controlled Sovcomflot, were named by the US Treasury Department as facing penalties for breaching oil price cap
THE US, Australia and members of the Group of Seven countries have announced a long-anticipated crackdown on evasive and deceptive shipping practices to breach price caps imposed on Russian oil trades, in their first maritime advisory on sanctions in more than three years.
The US Treasury Department statement on behalf of the price cap coalition warned of increased safety, environmental, economic, reputational, financial, logistical and legal risks for the shipping sector and recommended best practices to prevent sanction breaches.
The “advisory for the maritime oil industry and related sectors” was accompanied by a statement from the G7 (a club of rich democracies) and Australia announcing unspecified US action to sanction entities linked to two tankers that had shipped non-price cap compliant crude.
“These entities own vessels that used price cap coalition service providers and that carried Russian crude oil above the price cap limit,” the statement said.
The Marshall Islands-flagged aframax tanker Yasa Golden Bosphorus (IMO: 9334038) and Liberia-flagged suezmax tanker SCF Primorye (IMO: 9421960) were both cited.
The Liberian and Marshall Islands flags are run by US-incorporated Liberian International Ship and Corporate Registry, and International Registries Inc respectively. Yasa Golden Bosphorus was also insured by London-based Britannia P&I Club, while the insurer of SCF Primorye, beneficially owned by Russia’s Sovcomflot is unknown.
A $60 per barrel price cap on Russian crude was imposed on December 5, and on refined products from February 5 alongside import bans to Europe, affecting around 7.4m barrels per day of oil shipments.
Western marine service providers including charterers, shipowners, insurers, and banks are allowed to ship Russian oil providing cargo was sold at or below the price cap, with appropriate attestation to show compliance.
“Bad actors may use deceptive practices to gain or maintain access to price cap coalition services to transport Russian oil or petroleum products to be sold above the price cap or to engage in activity that may otherwise violate the coalition’s sanctions, laws, or regulations,” the advisory said.
Just under half of all oil shipped from Russia was carried on Greece-owned tankers under cap-compliant terms until July, when global oil price rises saw Urals grade — the biggest export grade — surpass $60 per barrel. Diesel breached its $100 cap in August..
Greece-owned vessels with price cap-compliant support accounted for 26% of Baltic and Black Sea trades in September.
The advisory highlighted the rising shadow trade of elderly tankers that are being used to ship oil in breach of the price cap, and how to identify it.
“A ‘shadow’ trade has become more pronounced, often involving actors and cargo affiliated with countries and persons subject to sanctions, or associated with other illicit activity,” the advisory said.
“This shadow trade is characterised by irregular and often high-risk shipping practices that generate significant concerns for both the public and private sectors.”
Tankers were fabricating or neglecting to undertake surveys or inspections and lacked regulatory certificates required under international conventions, with crew under pressure to disregard prudent shipboard practices, the advisory said.
Shadow tankers also relied on “unproven” protection and indemnity insurance providers and concealed ownership through complex corporate arrangements.
However, the two tankers facing sanction had none of the characteristics mentioned in the advisory.
Yasa Golden Boshorus is commercially operated by Yasa Tankercilik ve Tasimacilik, which has a commercial fleet of five tankers and is linked to Yalçın Sabancı, one of Türkiye’s richest families.
The advisory said marine service providers should watch for shipping and ancillary prices which were inflated and bundled into the delivered cost to conceal purchase above the cap.
“The billing of commercially unreasonable or opaque shipping and ancillary costs should be viewed as a sign of potential price cap evasion,” the advisory said.
Extra due diligence was necessary when market assessments indicated that Russian prices exceeded the cap, according to the G7.
“Heightened diligence may be appropriate for ships that have undergone numerous administrative changes [for example, re-flagging],” the advisory said.
“Industry stakeholders may also wish to conduct increased diligence when dealing with intermediary companies [for example, management companies, traders, brokerages and so on] that conceal their beneficial ownership or otherwise engage in unusually opaque practices.
The maritime advisory identified other practices, including disabling and manipulating Automatic Identification System equipment to conceal where cargoes were loaded and discharged.
“Such deceptive practices may cause industry stakeholders to unknowingly engage in transactions that are inconsistent with industry stakeholders’ compliance policies, affect industry stakeholders’ reputations, and trigger de-risking behavior from counterparties,” the advisory said.
“This de-risking can result in loss of access to reputable service providers, financing, customers, and ports.”
Among recommendations and best practices were “appropriately capitalised P&I insurance”, which referred to insurance from the 12 members of the International Group of P&I Clubs, classification from the 12 members of the International Association of Classification Societies, best practice use of AIS systems, and monitoring and reporting ship-to-ship transfers.
This is a hallmark of Russian oil trades, with STS areas in international waters including the mid-Atlantic, Cueta, off Gibraltar, and Kalamata, Greece commonplace for consolidating and transferring cargoes.
“Such transfers can also be used to conceal the origin or destination of cargo in circumvention of sanctions or other regulations,” the advisory said.
“Furthermore, STS transfers of crude oil or petroleum products outside of safe and sheltered waters entail heightened environmental and safety risks.”
*Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined by US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned. Download our explainer on the different risk profiles of the dark fleet here
Lloyd’s List Intelligence Seasearcher subscribers can add the Lloyd’s List dark fleet to their watchlists here