Russia sanctions: G7 Oil Price Cap Coalition Partners publish best practices advisory in response to recent developments in the maritime oil trade

The Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) of the EU Commission has published a press release in which it informs that – in view of Russia’s continuous aggression towards Ukraine, the subsequent imposition of the price cap restriction for the transport of crude oil of Russian origin, and new developments to evade this restriction – the Price Cap Coalition (see comment box below) has published a joint statement. In it, the nations reconfirm their commitment to enforce the price cap and any other sanction measure they deem appropriate to make Russia end its actions.
Furthermore, the coalition has published a new advisory which contains best practices for the maritime oil industry and related stakeholders in response to recent developments as regards activities to evade the price cap restriction. Specifically, perpetrators have altered trade routes, engaged numerous different shipping service providers, and „established“ a „shadow“ trade characterized by irregular and high-risk practices associated with sanctioned entities or illicit activities. Such activities pose significant risks to the industry, related market segments, and governments, including safety, environmental, economic, reputational, financial, logistical, and legal risks.
Therefore, the advisory now is addressed at both government and private sector actors involved – directly or indirectly – in the maritime trade of crude oil and petroleum products. It thereby aims to promote responsible practices, prevent and disrupt sanctioned trade, and enhance compliance with price caps on Russian Federation-origin oil products imposed by the coalition.
Specifically, the advisory sets out seven key recommendations firms and governments should adopt to achieve these goals. While most recommendations are addressed at the shipping industry only, one appears to be relevant for financial market participants as well:
Recommendation 6 advises stakeholders to perform thorough background checks and research when dealing with ships, especially those that have undergone frequent administrative changes like re-flagging. Additionally, it suggests that extra caution should be exercised when dealing with intermediary companies, such as management companies, traders, or brokerages, which hide their ownership or engage in suspicious practices. These dubious companies are more likely to engage in deceptive actions that can increase risks for those involved. The level of due diligence should be adjusted based on the specific characteristics of each business and the associated risks. This is particularly crucial when market assessments indicate that Russian oil prices are higher than a price cap, and when Coalition services are in use or being considered.