US Imposes Sanctions On Sovcomflot Manager And Oil Traders For Breaching Russian Oil Price Cap

New penalties against the Sovcomflot manager and a number of oil merchants have been imposed by the US Department of the Treasury’s Office of Foreign Assets Control (abbreviated the OFAC) for their role in helping Russia avoid an oil price cap.

Sanctions were imposed on Sun Ship Management, a division of Russia’s state-owned maritime firm Sovcomflot with headquarters in Dubai. In addition to managing the 158,100 dwt Suezmax SCF Primorye — which was previously sanctioned by the US for price cap violations — the company is registered on the fleet registry Equasis with 24 tankers.

The price cap coalition, which consists of Australia and the Group of Seven Nations, decided to set a ceiling of $60 per barrel on Russia’s oil exports last year. But a growing number of so-called “shadow tankers” and some purchasers paying higher than the legally declared price of oil has enabled Moscow to prevent price restrictions.

Additionally, since the implementation of the price cap regime, OFAC has sanctioned three traders who have grown their part in the Russian oil trade. They are Voliton DMCC, based in the United Arab Emirates, and Bellatrix Energy, as well as Covart Energy, based in Hong Kong.

Up to half of Russia’s oil exports are shipped by little-known oil traders with opaque ownership structures, according to an OFAC statement. These traders have become regular participants in the seaborne transport of oil generated by major Russian oil corporations since the price cap was implemented.

The penalties prohibit US people and businesses from conducting business with the groups and block them access to their US-owned property. These follow other sanctions imposed in 2023 on shippers of Russia’s oil priced above the cap. The action comes after a similar EU enforcement crackdown and a recent round of enforcement actions by the US, as well as the UK, against certain shippers and owners of tankers who the authorities claimed had taken advantage of the price restriction system.

The price cap alliance has further strengthened insurance companies’ and shippers’ compliance requirements. Service providers, such as shippers as well as movers of Russian oil, will soon be required by this action to obtain attestations from their buyers and sellers every time they lift or load Russian oil. Additionally, it will mandate that freight and insurance companies provide these records to organizations downstream in the supply chain upon request.

The penalties demonstrate their commitment to maintaining the principles of our price cap policy that advance the objectives of supporting stable energy markets while limiting Russia’s revenues to fund the conflict against Ukraine, says Wally Adeyemo, deputy secretary of the Treasury.

Those involved in the maritime transportation of Russian oil must follow the compliance guidelines set forth by the Price Cap Coalition, or else there will be repercussions, he declared.

Reference: Splash247

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