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The US Treasury department has imposed sanctions on three shipowners based in the United Arab Emirates, accusing them of exporting Russian crude oil priced above the $60 per barrel limit set by the G7 and Australia.
The move by Washington comes as it tries to increase enforcement of the Russian oil price cap following evidence that it was being widely circumvented. The Financial Times this week reported on data showing that, during October, almost all of Russian oil traded above the G7 price cap.
The G7 imposed the price cap on seaborne Russian crude oil last December in an effort to restrict the Kremlin’s war chest after its full-scale invasion of Ukraine, without disrupting the flow of energy to the global economy.
The US Treasury’s new sanctions, announced on Thursday, hit Kazan Shipping, Progress Shipping and Gallion Navigation. The Treasury said their ships used “US person services while transporting the Russian origin crude oil” — a key determination since the price cap only applies to Russian seaborne oil carried on vessels using shipping services or insurance provided from countries in the coalition.
“Shipping companies and vessels participating in the Russian oil trade while using price cap coalition service providers should fully understand that we will hold them accountable for compliance,” Wally Adeyemo, deputy US Treasury secretary, said in a statement.
Adeyemo added that the US was “committed to maintaining market stability” even as it aimed to cut the Kremlin’s profits. The US would be “unyielding in our pursuit of those facilitating evasion of the price cap” he said.
The UAE has emerged as one of the biggest sources of concern among western officials in terms of Russian sanctions evasion since the invasion of Ukraine began in February 2022, from the trans-shipment of dual-use goods to Moscow to the oil trade.
The G7-led price cap was designed by US and European officials late last year as a way of trying to rein in Moscow’s oil revenue, without banning crude exports outright in a way that would have triggered a big jump in oil prices. A second price cap on refined petroleum products was imposed earlier this year.
After a period of initial success, Moscow built up a series of alternative networks to sell Russian oil outside the cap, including without relying on G7 services such as maritime insurance.
Even though western officials concede the increase in Russian oil trade occurring above the $60/b cap, they say the cost of those transactions has also increased, limiting Moscow’s profits. They have vowed to sharply increase enforcement of the price cap, limit the incentives of trading Russian oil and change the calculation for ship owners around the world.