Sanctions | The EU strikes at Russia’s oil exports: sanctions on the shadow fleet and the state’s largest shipping company

Brussels

European Union strikes with economic sanctions the most important source of income for the Russian state, i.e. energy exports.

The new sanctions package announced on Monday makes it difficult for Russian companies to circumvent the oil price ceiling set by Western countries and limits Russia’s opportunities to use Western services in energy exports.

European Union puts Russia’s largest shipping company, the state-owned Sovcomflot, on the sanctions list. According to the sanctions decision, Sovcomflot has been one of the most important companies handling Russian oil sea transportation since the beginning of the war of aggression. According to its website, the shipping company owns or operates 147 vessels.

The decision means that EU companies may not offer any services to vessels owned by Sovcomflot. If the company’s ship were to arrive at an EU port, it could be seized.

According to the sanction decision, Sovcomflot enables the financing of the war of aggression in Ukraine.

“Therefore, Sovcomflot provides material and financial support to the government of the Russian Federation. In addition, Sovcomflot operates in economic sectors that constitute a significant source of income for the government of the Russian Federation,” the decision states.

In addition The EU is starting to rein in the activities of the so-called shadow fleet managing Russia’s oil exports in the Baltic Sea.

After the oil price ceiling set by Western countries came into force, Russia has transferred a significant part of its oil exports to the so-called shadow fleet. The term refers to a network of ships and companies that operates independently of established, Western service providers to avoid Western sanctions. Typically, ship ownership arrangements are complex and the true owners are unknown.

According to the commission’s estimate, the shadow fleet includes around 400 ships. In the first phase, however, there are only 27 ships on the banned list. According to the Commission, these vessels have been proven to have participated in evading sanctions or transporting illegal cargo.

The sanctions decision means that the EU prohibits European companies from offering services to these vessels. For safety reasons, only the provision of pilotage services is allowed in the future.

New for the first time, the sanctions package also hits the export of Russian LNG, i.e. liquefied natural gas.

In practice, the sanctions will stop the import of Russian LNG to Finland, as the sanctions approved on Monday prohibit the import of Russian LNG into the EU territory to terminals that are not connected to the gas network. In Finland, this applies to Tornio and Pori LNG terminals, which only serve local industry.

The EU also prohibits ship-to-ship transfers of Russian LNG in EU ports. Russia has used the ports of Belgium and France when exporting Arctic LNG to Asia. In Europe, LNG has been transferred from an ice-capable tanker to a regular tanker, which makes the transport faster and cheaper.