Hundreds of tankers could be banned from European ports as part of a new effort to crack down on illegal sales of Russian crude oil, which Western nations fear is helping fund the war in Ukraine.
After weeks of tense negotiations, EU countries on Wednesday finally signed the 11th package of sanctions against Moscow, due to be imposed in just over a year. But rather than introducing new restrictions, draft documents seen by POLITICO show Brussels is now focused on closing loopholes in existing rules, creating powers for secondary sanctions, and naming and shaming companies that break the rules.
“Attempts to circumvent EU restrictive measures have led to a sharp increase in fraudulent practices by ships transporting Russian crude oil and petroleum products,” the Council decision said.
Officials are concerned about the so-called shadow fleet of hundreds of old Russian oil tankers that may be bought at prices above the $60 a barrel price cap set by the G7 countries.
Many of the ships, which are typically owned by an opaque network of shell companies – many of which are reportedly linked to Greece – are said to have had their navigation systems switched off to hide the fact that they were docked in Russian ports, or fuel from other tankers assume sea to disguise its origin.
Measures proposed by the European Commission and agreed by member countries will ban ships suspected of these shady practices from entering EU ports “regardless of the flag under which they are registered”. Tankers must also notify authorities “at least 48 hours in advance” when planning a ship-to-ship transfer of oil within certain geographic areas.
According to Byron McKinney, a director at S&P Global Market Intelligence, “The package poses some potential challenge and added stress for companies on the compliance side, but I feel like it ended up being watered down.”
A “conservative” analysis by S&P estimates that a total of 167 tankers were involved in a ship-to-ship transshipment with a Russian ship and later called at an EU port.
Countries with large maritime industries such as Greece, Cyprus and Malta initially expressed reservations about plans to crack down on the practices, speculating they were doing so to protect their shipping companies.
“The new package is good, but is it radical? Probably not,” said Maria Shagina, a senior sanctions researcher at the International Institute for Strategic Studies. “The EU could possibly do more to inflict suffering on Russia, but we are at the point now where everyone is feeling a kind of tiredness – Greece and Hungary are haggling over the ‘list of names and shame’ and it’s a challenge, that one to hold the coalition together.”
“There’s a geographic split between the Poles and the Balts – who basically want a full embargo – and Germany, France and other states saying, ‘Well, we have to think about it, sanctions don’t hurt us any more than the target’ ” She said.
Russia has increased its oil exports to countries like India, China and Pakistan in recent months, while figures show the EU is importing crude-oil-refined fuel from these Asian countries.
In New Delhi, for example, shipments of Russian crude oil rose from about a million barrels a month to 63 million a month in April alone. In the meantime, diesel exports to the EU have increased tenfold and deliveries of kerosene have increased by more than 250 percent.
However, the deal does not breach sanctions rules as the G7 wanted to cut Russia’s gains while not destabilizing global oil markets.
In May, the International Energy Agency reported that despite price controls, Moscow’s crude oil shipments rose by 50,000 barrels a day to 8.3 million barrels, the highest level since the invasion of Ukraine.
“In fact, Russia could increase its volume to compensate for lost sales,” says the market analysis.
However, according to Maximillian Hess, a fellow at the Foreign Policy Research Institute and author of a forthcoming book on Russia sanctions entitled Economic War, the oil price cap is having an effect.
“The performance of the Russian state and Russian political economy are really changing for the worse. Russia feels the pain. It cannot invest in its future. It runs on fumes.”
Despite increased oil production, Moscow’s fossil-fuel government revenues in May were about 36 percent lower than a year earlier, forcing the country to fill a growing gap if it wants to further increase funding for its armed forces.
Leonie Kijewski contributed to the reporting.