U.S. Widens Oil Sanctions to Include Sovcomflot and 14 Tankers
The United States and the Western Allies have spent today, the second anniversary of Russia’s invasion of Ukraine, rolling out a broad swath of new sanctions targeting nearly every element of the Russian economy and industry. They also said the sanctions were spurred on by the death of Russian opposition leader, anti-corruption advocate, and lawyer Alexei Navalny.
The U.S. released a detailed analysis of the Price Cap initiative saying it is having a devastating effect on the trade and predicting it would increasingly restrict the oil trade. They conclude that enforcement is forcing Russia to sell oil at a steeper discount and limiting its revenue. Supporting that, the U.S. Department of the Treasury’s Office of Foreign Assets Control late today launched a broad effort directly at Sovcomflot, Russia’s state-owned shipping company and fleet operator, and 14 of its tankers.
Sovcomflot had already been the target of direct and indirection sanctions by the West which had prompted the company to transfer many of its tankers to offshore management companies and led to the increase in the shadow fleet. Since late in 2023, the U.S. has been targeting some of the offshore managers and operators as well as individual tankers. Before today, more than 20 tankers were listed for having violated the price cap.
“The price cap on Russian oil continues to serve its twin goals of limiting Kremlin profits while promoting stable energy markets,” said Deputy Secretary of the Treasury Wally Adeyemo. “Today, we take the next step by targeting Russia’s largest state-owned shipping company and fleet operator, dealing a huge blow to their shadow operations. We are entering the next phase of increasing Russia’s costs in a responsible manner to mitigate risks.”
Sovcomflot was designated for operating or having operated in the marine sector of the Russian Federation economy and for being owned or controlled by, or having acted for or on behalf of, directly or indirectly, the Government of the Russian Federation using Executive Order 14024 which the Biden administration has been using since 2023. Sovcomflot has also been sanctioned by Australia, Canada, New Zealand, and the United Kingdom and is under certain European Union (EU) restrictions.
The action lists both Sovcomflot and the tankers. The U.S. reports the 14 tankers, registered in countries including Panama and Gabon, are beneficially owned by Sovcomflot. These ships have been active in the oil trade tracked to ports ranging from the Russian oil terminals to China and India.
Recognizing that the vessels are active the U.S. is also issuing a general license authorizing the offloading of crude oil (or other cargo) from these 14 vessels for a period of 45 days. They also reported they were issuing a general license authorizing transactions with all other Sovcomflot-owned vessels at this time.
Multiple reports have contended in the past that Russia continues to find ways around the Price Cap and sanctions. However, Reuters and Bloomberg have also tracked some of the previously listed tankers showing they were delayed offshore or in some cases even turned around mid-voyage after the sanctions were announced.
UK Sanctions Dutch Oil Trader for Trafficking in Russian Oil
The government of Britain has sanctioned Swiss trading house Paramount Energy & Commodities SA and its owner for alleged violations of the G7 price cap.
Switzerland has been a hub for Russian oil-trading for years, and Paramount SA was one of a group of Swiss-linked firms that accepted the reputational risk of trading Russian oil after the invasion of Ukraine. According to Swiss investigative journalism outlet Public Eye, Paramount may have had ties to a prominent Russian oligarch, Gunvor founder Gennady Timchenko, who is now subject to Swiss, European and American sanctions. The firm has denied any connection to Timchenko.
Once efforts to sanction Russian oil got under way in Europe in mid-2022, a Dubai-based firm with a similar name, Paramount Energy and Commodities DMCC, began executing a similar trading pattern. The UAE does not require any compliance with the G7 price cap on Russian oil, allowing anonymously held subsidiaries to carry out transactions priced above $60 per barrel without repercussions or transparency. (Paramount DMCC and Paramount SA have no formal legal links, only similar names and reported trading patterns, and they deny any connection to each other.)
Previous reporting by the Financial Times has linked Paramount DMCC to the Kozmino oil trade, which has been consistently priced above $60 - and may have been underwritten by at least one Western insurer, which would be a potential breach of the G7 cap.
Paramount DMCC was sanctioned by the UK in November 2023. At the time, the UK foreign office said that the Dubai-based firm was “known to employ opaque ownership structures and has been used by Russia to soften the blow of oil-related sanctions."
More recently, Paramount SA has come under investigation by authorities in Switzerland in connection with Paramount DMCC's activities in the Russian oil-trading market. Swiss law does not hold Swiss firms accountable for all of the actions of their overseas subsidiaries, but there are other potential penalties. On Thursday, the UK government asserted that Paramount SA and Paramount DMCC have been "involved in obtaining a benefit from or supporting the government of Russia," and placed sanctions on Niels Troost, linking him to both firms. (Paramount DMCC has denied links to Troost.)
"Troost facilitates the unfettered trade of Russian oil outside the reach of UK and G7 sanctions," the UK government alleged.
The announcement was part of a package of new restrictions on Russian defense firms that had managed to escape previous rounds of sanctions, including manufacturers of rocket launch systems, missiles, explosives, machine tools and other goods for making and using military equipment. This includes Sverdlov State Owned Enterprise, the largest Russian maker of ammunition.
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