Sanctions update 5/ 2023

Risks related to the maritime transportation of Russian oil

We refer to our previous sanctions updates which can be found here.


Risks related to the maritime transportation of Russian oil

Swedish media has recently reported that the export of Russian oil via the Baltic Sea, primarily from the ports of Primorskt and Ust Luga, has increased significantly. The report suggests that in May 2023, about 200 tankers carrying Russian oil passed Gothenburg on its way to the Suez Canal and Asia. A similar voyage entails that a vessel passes essentially the entire European coastline and it is then not unlikely that the vessel will bunker or receive other services at European ports.

As previously reported (see our Sanctions Update of 8 June 2022 and 4 February 2023), the carriage of Russian crude and petroleum oils (HS code 2709 00 and 2710) is subject to various sanctions. The sanctions do not only cover the import of the relevant Russian oil products into the EU but also other activities. As a result, service providers, including port authorities, within the EU are recommended to exercise caution in case they contemplate providing services to vessels carrying Russian oil products.

EU has recently updated its FAQ regarding the interpretation of the relevant prohibitions
The FAQ is not legally binding but it nevertheless provides essential guidance.

The relevant prohibitions may be summarized as follows:

• It is prohibited to provide, directly or indirectly, “technical assistance, brokering services or financing or financial assistance, related to the trading, brokering or transport” to vessels carrying the relevant Russian oil products if the products have been purchased above a price cap (Article 3n of Council Regulation 833/2014). At the time of writing, the price cap is USD 60/MT. Relevant parties need to obtain reliable evidence of the purchase price by way of an attestation process. For information about this process, see the FAQ at page 215 and onwards. Notably, the prohibition applies until 90 days following the date of unloading of the relevant cargo.

• Access to EU ports (including any anchoring area within its jurisdiction) for vessels carrying the relevant Russian oil products is prohibited in the event the price cap is not complied with (Article 3m)

• According to the FAQ, it would seem that bunkering services may not fall within the ambit of the service prohibition although, in line with the previous point, in order for a vessel to call a EU port to bunker the price cap must be complied with. Insurance, on the other hand, is covered by the prohibition

• STS (Ship to Ship transfer) activities relating to the relevant Russian oil products in EU territorial waters (12 nautical miles from the baseline) appears to be allowed, provided the operation is not deemed to constitute the purchase, import or transfer of the oil into the EU in which case the STS is  prohibited irrespective compliance with price cap (Articles 3m and 3n)

• STS operations relating to the relevant Russian oil products taking place within a Member State’s EEZ (Exclusive Economic Zone)(200 nautical miles) must be reported to the competent authority 48 hours in advance. Absent such notification, port access is prohibited (Article 3eb(2)). Furthermore, if a EU company is involved in such an STS operation, the price cap must be complied with.

• A vessel’s access to a EU port shall be refused if the competent authority has reasonable cause to suspect that the vessel, during the voyage, by way of STS operations or unlawful manipulation of the vessel’s AIS signal, has been involved in activities in breach of the prohibitions in Articles 3m and 3n (Articles 3ab and 3ec). The FAQ lists numerous indicators at page 258 which should raise warning flags to this end.

One other aspect is that, according to media reports, many of these shipments are carried out by Russia’s so called “dark fleet” which consists of old vessels with obfuscated beneficial ownership involved in sanctioned oil trade. These vessels have for obvious reasons difficulties to obtain proper insurance. It can therefore be assumed that many of these ships lack insurance cover (to the extent non-European insurers lawfully could have provided insurance) despite the obligation for all vessels calling EU ports to be insured (and sometimes also when transiting territorial waters) pursuant to Council Directive 2009/20. This is particularly problematic given the poor state of the vessels and since the insurance, which generally is provided by the members of the International Group of P&I Clubs, benefits third parties and ensures a proper response in case of e.g. oil spills. The trade consequently entails significant risks for third parties and the environment.