U.S. Sanctions on Russia’s Tanker Group Sovcomflot

27th February 2024

Report: U.S. Sanctions on Russia’s Tanker Group

The United States has taken a further step to restrict Russia’s ability to finance its war in Ukraine by imposing sanctions on Sovcomflot, the country’s leading tanker group, the Treasury Department announced on Friday. This move targets a critical element of Russia’s oil export infrastructure, aiming to diminish the revenue it generates for the Kremlin’s war effort.

The sanctions, implemented by the Treasury Department’s Office of Foreign Assets Control (OFAC), specifically target Sovcomflot, also known as PAO Sovcomflot (FLOT.MM), and 14 crude oil tankers it owns or operates. These designations effectively freeze any assets Sovcomflot holds under US jurisdiction and prohibit U.S. entities from doing business with the company.

While the Treasury Department declined to disclose specific violations by Sovcomflot, a senior official stated in a call with reporters that the company, as a whole, as a parent company, has been implicated in price cap violations in addition to deceptive activity.

This move fits in with the larger plan of the G7, Australia, and the EU, which set a price cap of $60 per barrel on Russian oil in late 2022. The cap’s objective is to restrict Russia’s oil income without upsetting the world’s energy markets.

The designations today are basically intended to take some of their vehicles for doing that off the table, which is going to force them to invest more in spending, in creating new avenues for getting that oil out, the senior official remarked.

The sanctions are expected to further complicate Russia’s oil exports, which have already been significantly impacted by Western sanctions and the price cap. Many traditional European customers have reduced or eliminated their reliance on Russian oil, forcing Moscow to seek alternative buyers in Asia, primarily India and China. This shift has necessitated relying on a “shadow fleet” of older, less reliable tankers, resulting in longer shipping routes and increased transportation costs.

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The recent sanctions against Sovcomflot come on the heels of wider-ranging measures imposed by the U.S. on Friday, marking the second anniversary of the Ukrainian invasion.

conclusion

The U.S. sanctions on Sovcomflot demonstrate a continued commitment to applying economic pressure on Russia to curtail its war efforts. By targeting a key player in the country’s oil export infrastructure, the U.S. aims to further restrict Russia’s ability to generate revenue from its oil sales, potentially impacting its capacity to finance its ongoing military operations in Ukraine.

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