Janice R. Andrews
The United States has declared sanctions against Russia’s well-known tanker firm, Sovcomflot (FLOT.MM), in an effort to reduce the country’s oil sales income in the wake of the invasion of Ukraine. This development was announced by the Treasury Department on Friday, outlining steps taken to obstruct Russia’s ability to use oil proceeds to support military operations.
Russia, a significant oil exporter, is coming under increasing pressure from the West to pay for its activities in Ukraine. The goal of the most recent sanctions, which build on earlier ones, is to prevent Russian crude oil and oil products from leaving the country while maintaining the flow of petroleum supplies to international markets.
Fourteen crude oil tanker boats connected to Sovcomflot have been flagged by the Office of Foreign Asset Control (OFAC). Nonetheless, general permissions have been granted to enable 45-day offloading operations from these vessels and to authorize deals involving additional Sovcomflot tankers.
Speaking to reporters, a senior Treasury official justified the sanctions by pointing to Sovcomflot’s price cap violations and fraudulent practices. The actions limit transactions by American entities with the targeted entities and freeze their U.S. assets.
Prior to this, Western maritime services were not allowed to handle shipments of Russian oil that above the $60 per barrel price cap set by the G7, the EU, and Australia. The goal of the most recent sanctions is to obstruct Russian attempts to get around these limitations, forcing them to pay more for oil transportation.
Due to the constraints, Russia is now forced to rely on an outdated fleet of tankers in order to reach customers in far-off countries like China and India. The difficulties Moscow has in logistics reduces the amount of oil money available for military spending.
The penalties mainly target Sovcomflot’s activities in the Russian marine industry, even if specific violations were not revealed. The Treasury’s actions are part of larger sanctions against Russia in response to Moscow’s invasion of Ukraine and the demise of opposition leader Alexei Navalny, which impact over 500 individuals and entities.
October saw the start of the price cap’s enforcement; 27 tankers had already been fined for breaking the rule. Russia’s income streams are now much more restricted as a result of the harsher sanctions implementation, which forced Moscow to sell oil at a lower price than Brent crude.
