Seas of Strife: In the ever-evolving geopolitical landscape, the U.S., EU, and UK are turning their attention to the high seas, pressuring countries like Liberia, the Marshall Islands, and Panama to bolster oversight on ships flying their flags. The objective? To ensure these vessels don’t become conduits for Russian oil exceeding the $60 price cap — a measure implemented to penalize Moscow for its actions in Ukraine. This recent move marks a significant escalation in the West’s mission to enforce the cap, designed to curtail Russia’s export revenues while keeping global oil flows uninterrupted. Although the cap was introduced in late 2022, its enforcement has gained momentum only recently.
The mechanism behind this enforcement prohibits Western companies from providing essential maritime services, such as transportation, insurance, and finance, facilitating the trade of Russian oil that surpasses the stipulated cap. Faced with these restrictions, Russia has resorted to deploying a fleet of aging tankers, colloquially termed the “ghost fleet,” to transport oil and sidestep the imposed cap.
These vessels are navigating longer routes, reaching destinations like China and India, far beyond Russia’s traditional customer base. Notably, Panama, the Republic of the Marshall Islands, and Liberia have allowed certain vessels from this ghost fleet to fly their flags — a practice known as “flag hopping.” This maneuver enables shell companies engaged in trading Russian oil to operate under these flags and evade sanctions.
Lloyd’s List Intelligence, along with oil analysts, reports that nearly 40% of the approximately 535 dark-fleet tankers have registered ownership through companies incorporated in the Marshall Islands. The concerned parties, in letters to the three countries — Liberia, the Marshall Islands, and Panama — highlight the heightened circumvention of the G7’s price cap on Russian oil. They emphasize the substantial risk associated with vessels not availing Western insurance and other services, seeking alternative flags.
Also Read: Greek Shipping Giants Navigate Choppy Waters, Exit Russian Oil Trade Amidst U.S. Sanctions
While these three countries are not themselves at risk of Russian sanctions, the diplomatic pressure aims not to reduce the number of ships carrying Russian oil but to enhance compliance with the cap. The strategy seeks to elevate the cost for Russia in moving oil without employing Western shipping services. Additionally, it intends to provide leverage to countries outside the price-cap coalition, offering them discounted oil from Russia.
Traditionally responsive to U.S. requests to address illicit activities, Panama is positioned as a key player in this geopolitical chess game. The collective effort urges Liberia and the Marshall Islands to heighten awareness within the trade, emphasizing that their flags should not be associated with tankers transporting oil priced above the cap.
The letters, signed by key figures including Lindsey Whyte from Britain’s Treasury, John Berrigan from the European Commission‘s financial services unit, and Brian Nelson, a top terrorism financing official at the U.S. Treasury, convey the urgency and gravity of the situation. While Reuters hasn’t had access to these letters, responses from the U.S. Treasury, the British embassy in Washington, and the Delegation of the EU to the U.S. are still awaited. As the global community grapples with these maritime maneuvers, the story unfolds against the backdrop of heightened tensions, underscoring the complexities of geopolitics and the intricate dance of power on the open seas.