EU Sanctions Dubai-Based Inheritor of Sovcomflot's Fleet
The European Union has taken aim at Russia's tanker subterfuge by sanctioning Sun Ship Management Ltd. of Dubai, the operator of more than 90 tankers and LNG carriers that were once under the formal control of Sovcomflot.
The EU has designated Sun Ship Management as a subsidiary of state-owned shipping company Sovcomflot, recognizing Sun's origins as the SCF subsidiary "SCF Ship Management (Dubai)." The decision extends existing sanctions on Sovcomflot to Sun Ship, including a ban on financing and an EU asset freeze.
"Sun Ship has been operating as one of the key companies managing and operating the maritime transport of Russian oil," the EU said in a sanctions update. "The Russian Federation is the ultimate beneficiary.”
In April 2022, shortly after the invasion of Ukraine and the imposition of Western sanctions, Sovcomflot transferred control of about 90 of its tankers and LNG carriers to Sun. Sovcomflot denies any connection, but most of these vessels still carry the same names, including many with the prefix "SCF." Notably, the vessels include Russia's new icebreaking LNG carriers, the only ships of their kind and the pride of the Sovcomflot fleet.
"The Russian Federation is the ultimate beneficiary of the services offered by SUN Ship Management (D) Ltd. Such services provide a substantial source of revenue to the government of the Russian Federation . . . thereby enabling the Kremlin to finance its war of aggression against Ukraine," noted the EU.
The beneficial owners of Sun's fleet could continue to operate by transferring the vessels to new holding companies, reflagging, and joining the growing number of "dark" tankers serving Russian ports.
The EU also sanctioned Russian National Reinsurance Company JSC (RNRC), the new reinsurer of choice for Russian oil shipping. It became the main provider of reinsurance to the Russian-controlled tanker fleet after the imposition of the EU/G-7 oil price cap, which prompted Western reinsurers to withdraw from this market segment. When a Russian vessel gets denied access to Western reinsurance, RNRC is available to help, thanks to $4 billion in capitalization from the Bank of Russia.
"This reinsurance service offered by the RNRC has enabled the Russian government to deflect and mitigate the impact of western sanctions on its oil trade – which provides a substantial
source of revenue to the government of the Russian Federation," concluded the EU.
In addition, the European Union agreed to sanction Atomflot, the operator of Russia's nuclear icebreaker fleet. The EU noted that Atomflot's capabilities are key for Russia's Arctic hydrocarbon export strategy, particularly as it tries to send more oil eastward along the frigid Northern Sea Route to Asia.