US Treasury sanctions companies, tankers for violating G7-led price cap on Russian crude

The US Department of Treasury imposed sanctions Nov. 16 on three maritime companies and three tankers for carrying Russian crude oil above the G7-led $60/b price cap, signaling the ongoing US effort to ramp up sanctions enforcement and reduce the flow of funds for Russia's war on Ukraine.

But on their own, the sanctions imposed are not expected to be a game-changer because the sanctioned ships are Russian owned, said Fernando Ferreira, director of geopolitical risk service at Rapidan Energy Group.

"If anything, this exemplifies the challenges of enforcing the cap," Ferreira said. "These are single-vessel fleets that Russia created specifically to circumvent the price cap. These companies are expendable and can easily be replaced with new ones," he said.

The new sanctions are a part of the shift that the US took towards enforcement of the price cap in October, and they may lead G7 companies to become more reluctant to trade with Russia, said Rachel Ziemba, an adjunct fellow at the Center for a New American Security. But unless the new sanctions are followed up by a deeper system of price checks, penalties, and designations from the US and G7 allies, they will not meaningfully change the Russian oil market, she said.

"A key part of this shift towards enforcement will necessitate convincing other countries to require insurance and environmental safety standards that require high quality insurance," Ziemba said. "Otherwise, the net result will be a further shift into use of the dark fleet and barter trade."

New sanctions

Treasury's Office of Foreign Assets Control imposed sanctions on three ships owned by United Arab Emirates-based companies, OFAC said in a Nov. 16 statement. The vessels engaged in export above the price cap while using US-person based services, the statement said.

The sanctioned tanker Kazan is owned by Kazan Shipping, the Ligovsky Prospect is owned by Progress Shipping and the NS Century is owned by Gallion Navigation, the statement said.

"Shipping companies and vessels participating in the Russian oil trade while using Price Cap Coalition service providers should fully understand that we will hold them accountable for compliance," Deputy Secretary of the Treasury Wally Adeyemo said in the statement.

"We are committed to maintaining market stability in spite of Russia's war against Ukraine, while cutting into the profits the Kremlin is using to fund its illegal war and remaining unyielding in our pursuit of those facilitating evasion of the price cap," he said.

Russian links

While the sanctioned ships' registered owners are based in the UAE, data from S&P Global's Maritime Intelligence Risk Suite suggest they are ultimately controlled by Sovcomflot.

The Russian state-owned carrier did not immediately respond to an email seeking comment.

OFAC's latest action came after Lumber Marine's Suezmax tanker SCF Primorye -- also part of Sovcomflot's group fleet -- and Pearl Navigation's Aframax Yasa Golden Bosphorus were sanctioned in October for breaching the price cap.

Byron McKinney, trade finance director at S&P Global Market Intelligence, previously suggested sanctioning Sovcomflot ships would be "a token gesture" as the company were already targeted by various Western sanctions separately.

Russian crude prices have been above the price cap since July. Platts, a part of S&P Global Commodity Insights, assessed FOB Urals Primorsk at $68.18/b on Nov. 15.