EU adopts new sanctions package to clamp down on illicit Russian oil exports

The European Commission formally adopted June 23 its latest sanctions package against Russia which includes measures to clamp down on offshore tanker transfers of Russian oil and a ban on Russian crude flows via the northern branch of the Druzhba pipeline.

Aiming mostly at blocking the circumvention of existing sanctions again Moscow over its war in Ukraine, the EU's 11th sanctions package includes provisions to ban ships from EU ports if the vessel is suspected of engaging in ship-to-ship transfers of oil in breach of the Russian oil import ban or G7 Coalition price cap.

The Commission said the ban on access to EU ports will also apply if vessels manipulate or turn off their navigation tracking system when transporting Russian oil or fail to notify the competent authority at least 48 hours in advance about a ship-to-ship transfer occurring within the Exclusive Economic Zone of a member state or within 12 nautical miles from the baseline of that member state's coast.

Russian oil trade flows via offshore ship-to-ship transfer and "dark" tanker voyages to obscure the origin and destination of the trade have soared since the Western sanctions targeted Moscow's key oil revenues in the wake of the Ukraine war.

The so-called shadow tanker fleet comprised 443 ships with a draft of 10,000 dwt or more as of Feb. 27, including 316 dirty tankers and 127 clean tankers, S&P Global Market Intelligence estimates. S&P Global Commodity insights data shows that 215 tankers totaling 9.31 million dwt were engaged in 524 dark STS transfers in the first quarter of this year, compared with 72 tankers with 2.40 million dwt in 161 transfers in the same period last year, before Russia was hit by sanctions and caps on the price of the oil it sells.

Oil pipeline exports

In addition to the new shipping curbs, the latest sanctions also end the possibility of Russian crude imports via the northern branch of the Druzhba pipeline to Germany and Poland, the EU said.

Germany and Poland had already halted their imports of Russia's Urals crude via the line last year despite an exclusion for pipeline imports under the EU's ban on Russian oil. Limited volumes of Russian crude continue to flow to the Czech Republic, Slovakia and Hungary via the southern branch of the Druzbha line.

The 11th package also includes "strict and very targeted derogations" to the existing export bans to enable the maintenance of the CPC (Caspian Pipeline Consortium) pipeline which transports Kazakh oil to the EU through Russia, the Commission said. It also extends an exception to the oil price cap for Russian crude via Sakhalin oil for Japan until March 31, 2024.

The biggest part of the latest package, however, is a new, so-called "anti-circumvention tool" to curb flows of EU goods to Russia via third countries. The restrictions tighten and extend sanctions on technological items found on the battlefield and "dual-use" and advanced technology items from the EU.

"Anomalous, sky-rocketing trade figures for some very specific products/countries are hard evidence that Russia is actively attempting to circumvent sanctions. This calls for us to redouble our efforts in tackling circumvention and to ask our neighbors for even closer cooperation," the EU said.

The latest sanctions do not include any provisions to curb EU imports of fuels made from Russian crude outside the trade bloc.

In mid-May, the EU's high representative for foreign policy, Josep Borrell, told the Financial Times that the EU should also crack down on Indian fuel imports made from processed Russian crude as part of moves to toughen sanctions on Moscow and curb circumvention.

The EU currently only prohibits fuel imports that originate in Russia or are exported from Russia, but pressure on policymakers has been growing to stem soaring volumes of oil products made from refined Russian crude and exported to the EU.