The United Arab Emirates-based shipping company Hennesea was sanctioned by the US Treasury Department on January 18 for transporting oil from Russia at prices greater than the $60 per barrel cap that G7 nations had agreed upon.
Hennesea hit by sanctions for violating Russian oil price cap
The Treasury Department said in a news release that its Office of Foreign Assets Control designated the UAE-based Hennesea shipping company, which it said was the “ultimate owner” of the 18 tankers.
Shortly before implementing the price ceiling, Hennesea, established at the end of 2022 during Russia’s war, purchased old tankers. They made multiple port calls to Russia, where they carried oil and petroleum goods.
In 2022, Hennesea bought 18 tankers that transport Russian oil
Shortly before the price restrictions took effect, Hennesea purchased older tankers that transported Russian crude oil and petroleum products. Tankers owned by Hennesea have repeatedly entered Russian Federation ports, Reuters reported.
One Liberian firm that Hennesea owns shares in is HS Atlantica Limited, which the US sanctioned on December 1, 2023, for breaking the price ceiling.
The UAE-based company, as established by the US Treasury, is the final owner of 18 vessels that transported Russian oil at a price above $60 per barrel. The most recent punishments also applied to all of them.
The US announced stricter sanctions on Russian oil
“Today’s actions once again demonstrate that anyone who violates the price cap will face the consequences. No one should doubt our coalition’s commitment to stopping those who help the Kremlin, said Treasury Deputy Secretary Wally Adeyemo.
In December 2022, the West established a $60 per barrel ceiling for Russian oil exports via sea. The restrictions also forbid Western corporations from charging more than the maximum for oil transportation services from Russia.
Western sanctions led to half of Russia’s oil and oil product exports in 2023 rerouting to China, while India’s share increased to 40% over two years. Europe’s share in Russia’s oil exports dropped around tenfold to about 4-5% from around 40-45%.
Russia has invested in unofficially tracked “shadow fleets” of old tankers and redirected its oil supplies to remote countries like China and India as a result of the limitation.
Companies that transported oil from Russia at prices higher than the ceiling were subject to new sanctions by the US Treasury Department beginning in October 2023.
Price Cap Coalition tightened its compliance regime
The United States, European Union, countries in the Group of Seven, and Australia imposed a $60 a barrel limit in 2022 on Russian oil.
Prohibiting shippers, insurance, finance, and other services from handling cargoes of Russian crude oil unless it is sold at or below the $60 price cap. This measure ensures that the Kremlin cannot sell its oil for a higher price. The world’s key shipping and insurance firms are based in G7 countries, giving them leverage to set the price cap and make it difficult for Russia to sell its oil for a higher price.
Any purchases of Russian oil above the cap would violate the agreed-upon international sanctions. The cap aims to deprive the Russian government of revenue to sustain its war in Ukraine, compelling the Kremlin to either sell its oil at a discount or divert funds for a costly alternative oil shipping network.
In December 2023, the Price Cap Coalition announced changes to its compliance regime that the Treasury Department said would make it harder for Russia to bypass the cap. The Treasury Department announced that the coalition would request Western maritime service providers to obtain “attestations” from other businesses confirming the sale of Russian oil under the cap every time they transport it.
In 2023, new sanctions targeted firms across the United Arab Emirates, Hong Kong, and Turkey for allegedly violating the oil price cap.