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Price cap ‘phase II’ was spurred by Russia selling ‘large amounts of oil’ above the cap

‘Shadow fleet’ allowed Russia to sell ‘large amounts’ of oil above the price cap, Ofac says, but recent crackdown is forcing ‘steep’ discounts on Russian oil

Marking the two-year anniversary of Russia’s invasion of Ukraine, the US slapped sanctions on 500 entities and companies. The Treasury Department argued its recent crackdown, or ‘phase II’ of the price cap, is forcing Russia to again sell its oil at a ‘steep discount’, but admitted that Russia was able to sell ‘a large amounts of oil above the price cap’ through parts of last year thanks to the dark fleet*

THE US Treasury has defended the effectiveness of the G7 price cap on Russian oil but said the dark fleet* has let Moscow export “large amounts of oil” at prices above it.

In a statement released alongside 500 sanctions marking the two-year mark of Russia’s invasion of Ukraine, the officials defended the effectiveness of the price cap regime, adding that the crackdown on violations is forcing Russia to sell its oil at a “steep” discount.

The price cap has been criticised as ineffective because Russia has found other buyers for its oil using the dark fleet. But the Treasury said its crackdown since October on price cap breaches was having an impact.

Russia’s invasion sparked a surge in global oil prices and a large discount between the price of Russian Urals and the global benchmark Brent, but those discounts narrowed as the year progressed, until the price cap was announced.

“G7 finance ministers committed to imposing a price cap in September 2022, and the discount returned to historically high levels in December when the crude oil cap and EU import embargo were implemented,” the officials said.

The discount narrowed again as global prices rose towards the second half of last year. Both Russian Urals and diesel were assessed at prices above their respective caps of $60 and $100 per barrel in the summer.

“At that point, the discount narrowed as Russia shifted significant volumes of its oil exports into a shadow fleet that operated without G7 service providers,” the officials said.

“While this strategy was costly to Russia, the ability to sell oil without coalition service providers or by providing false attestations to Coalition service providers allowed it to sell large amounts of oil above the price cap.”

The coalition in October began targeting ships, companies and oil traders for the first time since the regime was implemented for crude oil in December 2022 and refined products in February 2023.

More than two dozen tankers were blacklisted by the US since the crackdown began. Twelve tankers laden with cargoes believed to be sold above the price cap were reported in late January to be stranded off India, seemingly unable to find buyers.

“Since October, the discount on Russian oil has increased meaningfully: from that low of $12-13 to a peak of $20 in January, and stabilising around $19 as of late February,” the Treasury said.

“The market dynamics that drive that discount are complex and identifying specific causal drivers must be done with care. But the outcome here is consistent with the goals of the price cap’s second phase: to force Russia to discount its oil further (whether under the cap with coalition services or without them).”

850 new US, UK, and EU sanctions

Twelve Russia-flagged vessels and two Russian shipping companies were among the 500 entities sanctioned by the US today. 

The list includes drill ship Bavenit (IMO: 8406573); General cargoships Skif-V (IMO: 8858087), Baltiyskiy 111 (IMO: 7612448) and Alireza- 1 (IMO: 6703769); and eight research vessels.

The two companies are Dalir Limited, which owns Alireza and Baltiyskiy, and Ladoga Shipping Company Limited, which owns Skif-V. Dalir and Ladoga were involved in facilitating arm transfers with Iran’s Ministry of Defence and Armed Forces Logistics (MODAFL), the US Department of State said in a statement.

The US also slapped sanctions on six entities involved in the Arctic LNG 2 project. These include LLC Shipbuilding Complex Zvezda, which the DOS said is involved in building up to 15 “highly specialised” LNG carrier to support Arctic LNG 2 exports; LLC Novatek Murmansk, also known as the Belokamenka shipyard, which the department said is “involved in the assembly of the gravity-based structures and LNG production lines for the Arctic LNG 2 project”; and LLC Modern Marine Artctic Trasnport and SPG, a joint venture to lease new-class LNG carriers to support Arctic LNG 2 exports.

Three Cyprus-based companies shipping were also blacklisted for ties to the Arctic 2 project: Azoria Shipping Company, Elixon Shipping Company, and Glorina Shipping Company, all with the same Limassol address.

LLC Arctic LNG 2 was designated by the US in November 2023 along with other entities involved in the project. Announcing its own 50 sanctions on Thursday, the UK sanctioned the company and its director, Oleg Vyacheslavovich Karpushin along with six directors of PJSC Novatek, a majority owner of Arctic 2 LNG.

The US also took aim at other future energy projects, blacklisting LLC Globaltek, a company it said was created in 2019 to establish the Yakutia Gas Project, and two companies involved in operating Russia’s Ust-Luga LNG terminal, LLC Ruskhimalyans and LLC New Communal Technologies.

State-owned enterprise JSC Rosgeologia was also sanctioned for supporting future Russian energy projects.

Meanwhile, the European Union released its own sanctions package targeting 300 individuals and entities. 

These include United Shipbuilding Corporation, a major state-owned enterprise sanctioned by the US in 2022, its subsidiaries, and close to two dozen other shipyards and firms involved in ship design.

The eight research vessels and the drill ship sanctioned by the US are linked to Russian entities involved in exploration in support future Russian energy projects, the DOS said. 

Over a dozen logistics and transportation companies and individuals were also blacklisted by the US for operating in Russia’s transport sector.


* 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 in 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


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