G7 leaders discuss more Russian shipping sanctions

Group of Seven (G7) leaders meet in Hiroshima to discuss further shipping-related sanctions against Russia.

The new measures, announced by leaders during the May 19-21 meetings, aim to circumvent sanctions against third countries and aim to undermine Russia’s future energy production and stem trade in support of the Russian military. An official announcement from the company on the shipping sanctions is expected on Sunday.

The G7 includes Japan, the United States, the United Kingdom, France, Germany, Canada and Italy, and the European Union. Ukrainian President Volodymyr Zelenskyy will also travel to Japan for talks.

US sanctions announced this weekend would cut about 70 companies from Russia and other countries from receiving US exports by blacklisting them. And there will be over 300 new sanctions against individuals, organizations, ships and planes.

Ahead of the summit, British Prime Minister Rishi Sunak announced a British ban on imports of copper, nickel and aluminum from Russia. Other G7 members are likely to follow suit.

The UK today announced a new wave of sanctions against Russia, targeting companies and individuals linked to Russia’s ability to fund and wage the war.

The 86 designations are aimed at individuals and organizations associated with Russia’s energy, metals, defence, transport and financial sectors.

These include a crackdown on “shady” individuals and entities, described in an official UK government press release, as being linked to the theft and resale of Ukrainian grain, and a crackdown on Russia’s major energy and arms transporters.

Rosatom-affiliated companies that manufacture advanced materials and technologies, including lasers, have also been sanctioned.

The UK also today imposed sanctions on a total of 24 individuals and entities linked to the Russian transport services. These include Pawell Shipping, State Grain Corporation (GZO) and its director Nikita Busel, who are linked to what the UK government has described as “systematic theft” of Ukrainian grain.

Six major Russian shipping companies that have enabled and supported Putin’s war economy have also been sanctioned by Britain. This includes Sun Ship Management, a company affiliated with Sovcomflot, Russia’s largest state-owned shipping company.

The European Union, meanwhile, has proposed banning access to its ports for ships trying to circumvent sanctions on Russian oil to prevent its crude oil and products from being shipped below the price caps set by the G7.

With price caps already in place for Russian crude oil and petroleum products, the EU’s focus is now on closing loopholes and enforcing the restrictions more effectively.

The EU has cited a “sharp rise in fraudulent practices and associated environmental risks” by ships attempting to circumvent the G7 price cap and a ban on Russian oil imports into the Union. Ships suspected or found to be violating the sanctions by conducting ship-to-ship transfers should be banned from European ports and locks, it said.

The breakdown of a loaded tanker Cani’s power Earlier this week in the Danish Straits, a vessel belonging to the so-called Dark Fleet has provided an additional boost to European countries seeking to stem the growth of the old, often poorly maintained fleet that transports Russian cargoes through the continent’s waters.

As part of the planned next round of EU sanctions, the union has also proposed targeting vessels that shut down navigation systems.

Earlier this week, the US Treasury Department’s Office of Terrorist Financing and Financial Crimes and Economic Policy released a progress report that purportedly underscored the price ceiling on Russian oil’s success in meeting its dual objectives: reducing Russia’s revenues and keeping the global energy market stable.

According to the Russian Ministry of Finance, the federal government’s oil revenues in January-March 2023 were over 40% lower than a year earlier. This is Russia’s main source of federal revenue. Before the war, oil revenues accounted for 30-35% of the total Russian budget. According to the American report, by 2023 oil revenues will have fallen to just 23% of Russia’s budget.

This drop in sales has occurred even though Russia exported about 5-10% more crude oil in April 2023 than in March 2022.

In response to the price cap, Russia was forced to change the way it taxes oil so that it institutionalizes the discounted value of Russian crude — essentially enshrining in law the deep discount that the price cap perpetuates.

“Despite widespread initial market skepticism about the price cap, market participants and geopolitical analysts have now acknowledged that the price cap achieves both goals,” the US Treasury Department said.

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