EU and US sanctions guidance leaves industry in the dark
Both in the EU and in the US, policymakers have been struggling to balance the promise of sanctions enforcement with a clear message that allows the continuation of trade.
As a result, attempts to codify what is and is not considered suspicious maritime activity are routinely falling short in terms of useful clarity for industry participants.
The watered-down guidance published by the EU on July 24 adds little clarity to what sanctions lawyers have described as “poorly drafted regulations”. The document confirms that vessel bans would only last for the duration of a single voyage and enforcement relies largely on “mutual trust and co-operation” between member states to monitor any potential breaches.
Under the rules unveiled in late June, tankers face a potential ban from EU ports if they fail to give 48 hours warning of ship-to-ship transfers within 370km of the shores of member states. Tankers carrying Russian oil that conduct STS transfers or turn off their AIS navigation systems also face a potential ban.
While the EU banned Russia-flagged ships from entering its ports from April in the past year, European operations can still ship Russian oil without breaching sanctions rules if the barrels are sold to third countries below the agreed fixed prices set out in the price cap.
A “shot across the bow”
That has effectively left both European and US policymakers struggling to achieve seemingly contradictory goals: reduce Russia’s oil revenues while simultaneously allowing trade at a level that prevents an oil price rally.
A draft advisory from the US Departments of State, Treasury and Energy, currently being circulated to interested parties prior to publication seeks to make recommendations concerning “specific best practices in the maritime shipping industry”.
Much like the EU FAQ guidance, the document attempts to spell out areas of concerns from the regulator’s perspective, including AIS gaps, high risk ship-to-ship transfers and vessels that have switched to non-mainstream classification and insurance providers.
While the document is still being drafted, Lloyd’s List understands that it is unlikely to offer a proscriptive set of specific guidance on these issues
Those familiar with this latest advisory insist it is not going to be of the same magnitude as the one published in 2020, which detailed a set of best practices for private industry to consider adopting to mitigate exposure to sanctions risk.
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The suggestion is it will be positioned more as “a shot across the bow to remind everyone that the US is paying attention”.
Oil price cap breach alters market
In the meantime, the first signs have emerged that the higher Urals oil price is quickly readjusting Russia’s oil export market in the Baltic and Black seas, as laden vessels gather off Ust-Luga amid a diminishing number of western-insured tankers loading cargoes
The Urals grade of Russian crude surpassed the oil price cap of $60 per barrel on July 12, based on estimates from price reporting agencies. That was the first time Urals oil had breached the cap since it was imposed on December 5 last year.
In the following 12 days, the number of Greece-owned tankers loading from Primorsk comprised 26% of vessels calling by deadweight, compared with a 50% average over the past 14 months, Lloyd's List Intelligence vessel-tracking data show.
Similar numbers were seen for the nearby port of Ust-Luga and Novorossiysk in the Black Sea, alongside a reduction in the number of tankers that are entered with International Group clubs calling at these ports.
Under the price cap, the 12 clubs within the group cannot insure tankers unless they have evidence the cargo was sold at or below $60 per barrel.
Four of 16 tankers tracked loading at Primorsk were entered with an IG club over the 12-day period. Five of the 15 that loaded at Novorossiysk were insured by IG clubs.
This contrasts sharply with Lloyd's List analysis from June that showed two-thirds of tankers that called at the five key export ports in the Baltic and Black Seas had western P&I cover.
With so many grey areas in policy and enforcement, organisations need to be even more vigilant when completing sanctions compliance checks, investigations and when monitoring vessels for illicit activity. Seasearcher Advanced Risk and Compliance can help provide a comprehensive view with actionable, AI-driven insights, industry-approved data models, standardised reports and ratings and expert analytical support.