INTERNATIONAL trade and shipping face increasingly complicated sanctions and compliance risks, with heightened enforcement, regulatory uncertainty and geopolitical tensions shaping the industry’s future, the Lloyd’s List Singapore Outlook Forum was told this week.

The discussion came as the EU strengthens sanctions on Russia, while the US attitude towards Moscow grows more ambiguous, along with growing concerns over the environmental threat posed by the dark fleet*.

Nathanael Lin, a partner at Singapore-based law firm Rajah & Tann, saw Brussels’ adoption last month of its 16th sanctions package on Russia as a significant broadening of the EU’s goals.

The shift towards targeting entities that support the dark fleet extends beyond the recent focus on specific ship designations, potentially putting flag states, financial institutions and insurers in the spotlight.

Lin further said the impact could also implicate Asian subsidiaries or Asia-based businesses controlled by or tied to EU entities.

“We see an increased regulatory risk on Asian clients who have EU links, and we anticipate that will only drive up the regulatory cost and risk of shipping, but any other sector that has a multi-jurisdictional business.

“Companies with EU links are subject to a rather uncertain regulatory landscape where we anticipate that there will be a broadening of EU regulatory enforcement, looking eastwards in particular,” said Lin.

Saskia Rietbroek, executive director and co-founder of the Association of Certified Sanctions Specialists, shared insights from her travels to Central Asia and Southeast Asia, where she worked on educating governments and businesses about EU sanctions on Russia in an outreach project backed by the European Commission.

Her research found that exports of high-priority goods from the EU to intermediary countries, such as Kazakhstan, Kyrgyzstan and Malaysia had surged dramatically — sometimes by 1,000% — before being re-exported to Russia.

Many of these companies were set up by Russians who had fled conscription, but still engaged in business that indirectly supported the Russian economy.

Rietbroek said that circumvention remains the EU’s top enforcement priority, although many regulators in those third countries lack resources to monitor and prevent violations effectively.

The latest EU sanctions show recognition of loopholes needing to be plugged, said Donal Keaney, a partner at Hill Dickinson. But he also worries new solutions create new problems.

Taking dark fleet tankers as an example, targeting insurers raises risks for shipowners and vessels potentially facing maritime incidents, he explained.

Shipowners may conduct “Know Your Counterparty” checks on insurers as part of their due diligence process. However, they lack control over the insurer’s actions once their vessel is insured, according to Keaney.

There are concerns over whether insurance would be able to effectively respond in cases of [for example] collisions or salvage operations, due to the possibility that the underwriter could fall foul of a sanctions regime in the period between obtaining insurance and encountering an incident. This could potentially expose the innocent shipowner to significant liabilities to third parties."

“Is the shipowner going to be left with that risk an insurer possibly didn’t undertake appropriate due diligence on other business and it [the insurer] has now become a sanctioned entity?

“It is a very important step for the EU to take to counter the problem we see with the dark fleet, but it creates its own inherent risks for shipowners doing business that just requires even further due diligence in everything they do,” said Keaney.

On a relevant topic, Keaney also emphasised how dark fleet vessels, often operated with untraceable ownership and unknown insurance, posing huge threats to the marine environment and coastal authorities if accidents occur.