US slaps sanctions on Sovcomflot manager and traders of Russian oil for price cap breaches
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued new sanctions on Sovcomflot shipmanager and several oil traders for helping Russia evade a cap on its oil price.
Sanctions were placed on Sun Ship Management, a Dubai-based subsidiary of Sovcomflot, Russia’s state-backed shipping company. The company, listed on the fleet register Equasis with 24 tankers, also manages the 158,100 dwt suezmax SCF Primorye, which had previously been sanctioned by the US for price cap violations.
The Group of 7 Nations and Australia, known as the price cap coalition, agreed last year to cap Russia’s oil export prices at $60 per barrel. However, an increasing fleet of so-called shadow tankers and certain buyers paying more than the officially reported oil price has enabled Moscow to avoid price restrictions.
OFAC also sanctioned three traders that have increased their share of the trade of Russian oil since the price cap policy was implemented. The traders are Hong Kong-based Bellatrix Energy and Covart Energy, and UAE-based Voliton DMCC.
“Since the imposition of the price cap, little-known oil traders with opaque ownership structures have emerged as frequent participants in the seaborne transport of oil produced by major Russian oil companies, shipping up to half of Russia’s oil exports,” OFAC statement said.
The sanctions, which follow others imposed this year on shippers of Russian oil priced above the cap, block their access to their US-owned property and prevent US individuals and firms from doing business with the groups.
The move follows a similar enforcement clampdown by the EU and a recent wave of enforcement proceedings by the US and the UK against some tanker owners and shippers who authorities said have cheated the price cap mechanism.
The price cap coalition has also tightened compliance rules for insurance firms and shippers. Under this move it will soon require service providers, including shippers and movers of Russian oil, to receive attestations from their purchasers and sellers each time they lift or load Russian oil. It will also require insurance and freight firms to share these documents upon request with entities further down the supply chain.
Deputy Treasury Secretary Wally Adeyemo said the sanctions “demonstrate our commitment to upholding the principles of the price cap policy, which advance the goals of supporting stable energy markets while reducing Russian revenues to fund its war against Ukraine.”
“Participants in the maritime transport of Russian oil,” he said, “must adhere to the compliance guidelines agreed upon by the Price Cap Coalition or face the consequences.”
