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US Sanctions Three Sovcomflot Tankers in Effort to Enforce G7 Oil Price Cap

oil sanctions
U.S. Treasury listed three UAE companies and three Sovcomflot tankers for violating the oil price cap (file photo)

Published Nov 16, 2023 2:12 PM by The Maritime Executive

 

The United States for the second time in a month is going after the oil tankers involved in the Russian oil trade as reports persist of repeated violations of the price cap improved by the G7 and Western nations. U.S. officials said today’s action, which includes sanctions on three tankers but stops short of naming Sovcomfot directly, again underscores the Treasury Department and Biden Administration’s commitment, alongside its international partners, to reducing oil revenues that the Russian government can use to bankroll the war in Ukraine.

“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,” said Deputy Secretary of the Treasury Wally Adeyemo. “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.”

The action comes just days after a report that Russia is routinely exceeding the price cap. Unnamed EU officials responded to the Financial Times saying that it was clear efforts needed to be taken to tighten up the controls. Reports surfaced that the EU was considering having Denmark act as an enforcer checking the documentation of tankers. Denmark administers key sea lanes that are the passageway from the Baltic which accounts for as much as 60 percent of Russia’s oil exports.

In the latest efforts, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is imposing sanctions on three entities and identifying as blocked property three crude oil tankers that used Price Cap Coalition service providers while carrying Russian crude oil above the coalition-agreed price cap. 

The targeted vessels were part of the fleet of ships Sovcomflot moved into the management of companies based in the UAE in response to the growing sanction. Listed by the U.S. are the Kazan, a 2003-built 115,000 dwt tanker, the Ligovsky Prospect, a 2003-built 114,600 dwt tanker, and the NS Century, a 2006-built 110,000 dwt tanker. All the vessels are registered in Liberia. All three of the tankers are currently in Asia, with two of them showing from their AIS that they are in Chinese ports.

U.S. officials alleged that the vessels engaged in the export of Russian crude oil priced above $60 per barrel after the crude oil price cap took effect. They said the tankers had each used U.S.-person services while transporting the Russian-origin crude oil.

As with the effort in October, the U.S. however stopped short of directly naming Russia and Sovcomflot. They designated Kazan Shipping, Progress Shipping, and Gallion Navigation, each based in the UAE operating or having operated in the marine sector of the Russian Federation economy.

The U.S. imposed the first sanctions on two tankers in mid-October as it sought to increase pressure on the price cap while the G7 also issued a statement warning the shipping industry on the tactics used for price evasion. With the price of oil however hovering around $25 above the cap Russia has been easily evading the cap. Reuters however cited data from the International Energy Agency showing a small decline of nearly 70,000 barrels per day in Russian exports.

A Treasury official also told Reuters that the U.S. would take further unspecified action in the coming weeks and months to increase Russia's costs. Oil remains one of the main targets in the efforts to reduce Russia’s export income.