The effectiveness of U.S. sanctions against Russia has been questioned by numerous experts and observers. Many experts have emphasized that despite major international sanctions, Russia was able to proceed with and maintain its invasion of Ukraine.
Moreover, even the international oil price cap did not appear to be enforced, as parties can falsify shipping documents or misrepresent the origin or destination of oil shipments to avoid detection and compliance with sanctions.
In light of these challenges, in an interview with the Wall Street Journal, U.S. Treasury Secretary Janet Yellen stated that the U.S. is “very likely” to start enforcing the price cap of $60 per barrel on Russian oil. On Thursday, October 12, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions against two shipping companies over allegations that they had “violated international price caps on Russian oil.”
The OFAC sanctions targeted a shipping company based in Turkey, Ice Pearl Navigation, and another based in the UAE, Lumber Marine SA. Both companies were found to have sold oil above the $60 price cap.
In addition to false documentation, we have identified some key sanction evasion schemes below:
- Third-Party Involvement: Actors may engage third parties or intermediaries to facilitate transactions, making it difficult to trace the involvement of sanctioned entities.
- Shell Companies: Creating shell companies or front organizations to hide the true ownership or involvement of sanctioned entities in the transactions, making it harder for authorities to identify violations.
- Trade through Proxy Countries: Transactions may be routed through intermediary countries not subject to the same sanctions, obscuring the true origin or destination of the oil.
- Cryptocurrencies: The use of cryptocurrencies for transactions can provide a level of anonymity, making it harder to track financial flows related to oil trade.
- Barter Trade: Engaging in barter trade or other non-monetary transactions to exchange goods or services, avoiding traditional financial systems and scrutiny.
Despite the $60 price cap per barrel, Russia’s benchmark crude, Urals, exceeded $60 during the summer. Russia not only continued its oil shipments but also started making additional profits. An investigation by the French newspaper Le Monde, titled “Russia’s ghost fleet: Moscow’s new oil routes,” revealed that after the EU’s embargo on Russian oil, it continued to flow to Asia and, on certain occasions, ended up in EU countries after being refined.
Edit: This article has been updated since its original time of posting.
