Price Cap Coalition Cracks Down on Sanctions-Busting: New Advisory Takes Aim at Russia’s ‘Shadow Fleet’

The Price Cap Coalition has released an updated advisory aimed at curbing illicit practices and enhancing safety in the oil shipping industry.

The coalition, comprising G7 nations, the European Union, Australia, and New Zealand, has put forth a set of recommendations designed to combat the growing threat of a “shadow fleet” and reinforce compliance with international sanctions.

The coalition’s price cap policy on Russian oil, implemented in December 2022 in response to Russia’s invasion of Ukraine, aims to limit Russia’s oil export revenue while maintaining a stable global oil supply. This policy targets Russian oil sold above a set price threshold, allowing legitimate, price-compliant oil trade. By doing so, it strives to balance economic pressure on Russia with global energy security.

The new advisory expands upon previous guidance and introduces new measures to address complex issues stemming from geopolitical shifts in maritime oil trade. It covers a wide range of concerns, including maritime safety, environmental risks, and financial and legal implications for industry stakeholders.

“This updated advisory reflects our ongoing efforts to promote responsible practices in the industry to prevent and disrupt sanctions evasion,” stated the Coalition in the document. The group emphasized its commitment to “facilitating conditions to allow for the responsible maritime trade of crude oil and petroleum products within a reputable, safe, and secure market”.

A key focus of the advisory is the emergence of a “shadow” trade, characterized by irregular and high-risk shipping practices. This phenomenon often involves actors affiliated with sanctioned entities or engaged in illicit activities. The Coalition warns that vessels in this shadow fleet are typically older ships operating beyond their traditional lifespans, potentially increasing the likelihood of marine casualties.

Key Best Practices for Industry Stakeholders:

To mitigate these risks, the advisory outlines eleven detailed recommendations, including four (8-11) that have been added to the updated advisory. The recommendations are as follows:

1. Require Legitimate Insurance: Ensure vessels have continuous, legitimate insurance coverage from reputable providers to cover liabilities like oil spills and environmental damage.
2. Receive Classification from Recognized Societies: Verify that vessels are classified by an International Association of Classification Societies (IACS) member to ensure seaworthiness and compliance with safety standards.
3. Use Automatic Identification Systems (AIS): Promote continuous AIS broadcasting throughout voyages to enhance transparency and reduce exposure to illegal activity, complemented by Long-Range Identification and Tracking (LRIT) where feasible.
4. Monitor High-Risk Ship-to-Ship (STS) Transfers: Ensure STS transfers comply with international and national regulations, as they are high-risk for concealing the origin or destination of cargo.
5. Request Itemized Shipping Costs: Require transparency in shipping and ancillary costs to prevent price cap evasion and ensure charges are commercially reasonable.
6. Conduct Due Diligence: Perform thorough due diligence, especially on vessels with multiple ownership changes or opaque ownership structures, to mitigate risks associated with deceptive practices.
7. Report Suspicious Ships: Report vessels that show signs of illicit or unsafe activity, particularly those breaching sanctions or price caps, to the relevant authorities.
8. Ensure Compliance with Maritime Safety and Environmental Standards: Work with flag and port states to ensure vessels meet international safety, environmental, and pollution prevention obligations.
9. Monitor Tanker Sales: Conduct due diligence on tanker sales to prevent illicit use, particularly when dealing with aging vessels or complex ownership structures.
10. Avoid Interactions with Sanctioned Parties: Regularly check for interactions with sanctioned entities and proactively avoid dealings with vessels or companies linked to illicit activities.
11. Raise Awareness and Enhance Transparency: Develop training programs to educate employees on shadow fleet risks and deceptive practices, while fostering open communication and data sharing to improve industry transparency.

The Coalition also addresses the critical issue of sanctions evasion, particularly concerning the oil price cap policy implemented in response to Russia’s war against Ukraine. “Some actors may use deceptive practices to access Price Cap Coalition services to transport Russian oil or petroleum products sold above the price cap,” the advisory warns, highlighting the need for vigilant monitoring and reporting of suspicious activities.

In a move to enhance global cooperation, the Coalition calls on Flag States, Port State Controls, and Coastal States to play active roles in upholding international maritime safety and environmental standards, aiming to create a more robust framework for detecting and preventing illicit activities in the maritime oil trade.

“Industry stakeholders should engage with Flag States, Port States, Coastal States, and relevant authorities on vessels of particular concern. If an industry stakeholder is aware of potentially illicit or unsafe maritime oil trade, including suspected breaches of the oil price cap, they should report this to relevant authorities,” the advisory states.

As the maritime industry navigates these complex challenges, the Price Cap Coalition’s advisory provides a vital roadmap for stakeholders in the global oil trade. By adopting these recommendations, the Coalition seeks to protect the integrity of maritime commerce while effectively enforcing international sanctions and environmental standards.

Unlock Exclusive Insights Today!

Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.

Sign Up