US sanctions two oil shippers for violating Russian price cap

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The US has imposed sanctions on two companies shipping Russian oil, in its first enforcement of measures designed to choke off revenues to the Kremlin as continues its full-scale invasion of Ukraine.

The US Treasury department said on Wednesday that the two companies, based in the UAE and Turkey, had used US-based shipping services while carrying Russian crude bought at a price greater than $60 per barrel, violating the oil price cap imposed on Russia by G7 countries last year.

The enforcement measures come amid a broader effort by G7 countries to restrict the flow of petrodollars to Vladimir Putin’s war chest. The group issued a statement on Thursday outlining the “risks of violating” the price cap rules.

“Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” said US deputy treasury secretary Wally Adeyemo.

The new sanctions enforcement come as the Biden administration tries to build pressure on the Kremlin for its war in Ukraine and to show support for Ukraine after Congress recently omitted more funding for the country in a stop-gap spending measure. 

A senior treasury official said that Russian oil tax revenue was down 45 per cent from January to August this year compared with the same months in 2022.

But Russia has increasingly managed to dodge sanctions on most of its oil exports, with almost three-quarters of Russian crude travelling without western insurance in August. 

A rally in oil prices in recent months has also helped Russia, with Brent crude rising by more than a third between June and September to almost $100 a barrel, before dropping off again in recent weeks.

The Treasury said it had imposed sanctions on UAE-based Lumber Marine for shipping Russian crude bought for more than $75/b aboard its ship SCF Primorye. It is also sanctioning Turkey’s Ice Pearl Navigation Corp, whose Yasa Golden Bosphorus ship handled Russian crude bought for more than $80/b. Both companies used US-based service providers while shipping the oil. 

In a statement on Thursday the G7 said that “given recent price movements” it was “focusing on supporting compliance and enforcement of the [oil price cap] policy”.

“Where we have evidence that companies or persons have engaged in illicit or deceptive practices related to shipments of Russian origin crude oil and petroleum products, we will respond in accordance with the respective restrictive measures established by the coalition members,” it said. 

Officials have previously acknowledged that the oil price cap needed to be fortified, with Bruno Le Maire, the French finance minister, on Thursday saying that while it was the “right policy” it now needs to be “reinforced”.

“I strongly believe that the price cap has been a good decision, it has been efficient [in reducing] revenues from oil from Russia,” he told reporters on the sidelines of the IMF and World Bank’s annual meetings in Marrakech. But he said “loopholes” still needed to be addressed.

Speaking with reporters on Wednesday in Marrakech, Treasury secretary Janet Yellen underscored the need for the US to “continue to impose severe and increasing costs on Russia and continue efforts to ensure Russia pays for the damage it has caused”.

As part of that strategy, Yellen extended her support for European proposals to use profits generated by more than €200bn of Russian assets frozen at international financial institutions to help Ukraine. The bulk of those funds is held at the world’s largest clearinghouse, Belgium’s Euroclear. 

Having already racked up considerable tax income on the profits stemming from the frozen assets, Belgium also announced that it would launch a €1.7bn fund using those proceeds to help finance the war in Ukraine.

Additional reporting by Sam Fleming