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21st Feb 2024

Europe continues to finance Russia's war in Ukraine with lucrative fossil fuel trades

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European ships are still exporting millions of tonnes of fossil fuels from Russia and providing crucial funds for Vladimir Putin's war in Ukraine.

On 5 December, the EU started enforcing an embargo on Russian oil exports. The sanctions were supposed to curtail revenues and at the same time dissuade European shippers from moving fossil fuels to the rest of the world. One month later, an Investigate Europe and Reporters United investigation finds the move is having little impact: Moscow still profits highly from exports and European firms still facilitate much of the trade.

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Oil, gas and coal tankers from Europe with almost 16 million deadweight tonnes (DWT) in capacity conducted hundreds of voyages after the latest sanctions took effect. This represents 40% of the DWT of all ship departures. More than 100 of these shipments were destined for ports in Europe.

High-profile Greek shipowners still dominate the trade, while ships operated in Germany, Monaco, Cyprus, Denmark, Italy, Norway and the UK all exported in the past month. The research, which is the latest release from the Fuelling war series, also found that Russia's sanctioned state-run firm Sovcomflot still facilitates European trades via its links to an entity in the United Arab Emirates.

European trade persists

The December sanctions include a ban on seaborne crude oil going to the EU. EU vessels, insurers and others facilitating trades are also barred from sending crude oil internationally unless purchased within a price cap set by the west. A ban on EU imports of Russian coal began in August.

Despite the measures, a host of European firms continue to profit from moving fossil fuels out of Russia. There is no evidence that the trades are illegal, but Europe's persistent business dealings with Russia are ultimately adding millions of euros to the Kremlin's war chest.

Between 5 December and 5 January, 689 fossil fuel shipments left Russian ports internationally. 250 were journeys by European tankers, analysis of the Centre for Research on Energy and Clean Air (CREA) and Equasis data shows. European insurers provided cover for most of them.

Greek shipping magnates

Greek firms were behind 161 trades on tankers totalling 12 million DWT — one-third of the total ship capacity of all exports.

TMS Tankers, controlled by billionaire art donor George Economou, who has a gallery named after him at London's Tate Modern, conducted 11 voyages on ships with more than 1 million DWT. The Andreas Martinos-led Minerva Marine, meanwhile, embarked on 13 trips from Russia with 1.2 million DWT ship capacity.

Others include a trio who also control major media outlets in Greece — all highly critical of the invasion.

Avin International, controlled by Vardis Vardinoyannis, who owns two of Greece's six private TV stations, sent crude oil on ships with 270,000 DWT after 5 December. A firm belonging to Ioannis Alafouzos, owner of the SKAI network, left Russia on 3 January with a crude oil cargo bound for Turkey. (In an annual report for another of his companies, Alafouzos said he was "deeply shocked by the atrocities perpetrated against the innocent people of Ukraine'' and condemned "the Russian state's invasion." Alafouzos also sued a Greek MP who had accused the shipowner of "hypocrisy" on the matter.)

Four days earlier, Capital Ship Management, which is controlled by Evangelos Marinakis, owner of football clubs in England and Greece and the Mega television network, left Russia with thousands of tonnes of crude oil for an undeclared destination. None of the firms had responded to requests for comment at the time of publication.

Petroleum sanctions are next

German ships, with almost 1 million DWT in capacity, left Russia 20 times after the latest sanctions started. Analysis shows no crude oil trades listed, but 15 shipments of unspecified oil products destined for the EU. This is not yet illegal. But such trades are set to be curtailed as an embargo and price cap on petroleum products starts in February.

"I feel shocked learning that European shipping firms and their high-profile owners have continued to export bloody Russian oil and gas, and this drives me to demand justice," says Svitlana Romanko, founder and director of Ukrainian NGO Razom We Stand.

"I call on the responsible European officials to immediately investigate, and find out if sanctions are being violated, or if these firms are complicit in illegal practices by cooperating with Russia."

Between the invasion of Ukraine starting on 24 February and 5 January, European ships have transported half of all seaborne fossil fuel shipments by DWT from Russia. Greek firms have conducted more than 1600 journeys, on ships with 136 million DWT — 35% of the 395 million DWT global total.

The Kazakhstan loophole

EU-bound exports, coming on all ships globally, totalled 8 million DWT between 5 December and 5 January, according to the CREA data. EU imports of crude oil are now banned, but data indicates that 30 consignments left for the region after the embargo started with 18 transported on European tankers.

A loophole in the sanctions allows such trades if the crude oil originates elsewhere and is only transported from Russia.

The ports of Novorossiysk and Ust'-Luga receive large quantities of crude oil from Kazakhstan and 23 of the 30 trades listed for the EU left from these ports. The Novorossiysk terminal is part of the Caspian Pipeline Consortium (CPC) which sends oil from western Kazakhstan via its pipeline to the Black Sea port. It is part-owned by the Russian state — Transneft owns a 24% stake in the project, according to the CPC website.

Sovcomflot under scrutiny

Russia is now reportedly amassing a "shadow fleet" of tankers that can trade untouched by the sanctions. Its state shipping enterprise Sovcomflot is under international sanctions. But to continue exporting fossil fuels to the EU, the firm has transferred management of dozens of its ships to a company registered in the United Arab Emirates.

Investigate Europe found that Sun Ship Management, whose directors include Sovcomflot executives according to Dubai's financial registry, carried out 39 journeys after 5 December on ships with 3.2 million DWT. These included seven EU-bound exports: four oil shipments to Greece and one each to Belgium, Poland and Spain.

SCF Overseas Holding Limited, a Sovcomflot entity, was listed as the sole shareholder until 18 January. Its new shareholder is Star Choice (Hong Kong) Limited. Analysis of the Hong Kong corporate register shows that it shares two directors with Sun Ship Management, the same individuals are believed to be current Sovcomflot employees. Sovcomflot and Sun Ship Management did not immediately respond to requests for comment.

Exports go elsewhere

Russia now mostly relies on non-sanctioned markets for its energy exports as the number of cargoes going to Europe waned during 2022. This happened as western measures targeting the sector and moves against Russian individuals and finance took hold. But global export volumes remained steady as China, India and Turkey emerged as growing import markets. Although there remains uncertainty about the ultimate destination of some trades in the data due to the opaque nature of the industry.

Sanctions are beginning to have an impact, according to a CREA briefing in January. Oil and gas trades account for 40% of Russia's federal budget but a combination of the EU ban and price cap, and a significant drop in global prices, saw its December revenues slump to February 2022 levels.

But while losses have started to mount compared to the inflated revenues of last year, CREA estimates Russia is still earning €640 million per day from its exports.

The west has "hamstrung its plan's chances of success", according to some analysts, who argue the absence of major buyers China, India and Turkey in the price cap is one key flaw. Another is that the price cap — set at $60 per barrel — is above the average price for Russian Urals crude.

Ukraine President Volodymyr Zelensky has said the mechanism is "weak" and Ukraine, along with Poland, the Baltic states and a host of civil society groups have called for a much lower price ceiling.

'Price cap relies on honesty'

European shippers and insurers can continue facilitating crude oil trades. But with exports now price capped for global buyers, traders have to prove purchases are legal.

An insurer is named for 60% of the fossil fuel trades which left Russia after 5 December, almost all are firms from the UK, Norway, Sweden or Luxembourg. The International Group of P&I Club, whose members provide coverage for 90% of global seaborne cargo, now faces various compliance challenges when covering trades.

A European Commission spokesperson told Investigate Europe: "It is for EU Member States to implement EU sanctions. National authorities are therefore responsible for ensuring that this price cap is respected. The European Commission is not competent to assess individual cases of sanctions application." They added: "The Commission has always said that it stands ready to propose new sanctions, if necessary."

The system is "unenforceable" and "allows European companies to facilitate a trade that is funding the war in Ukraine", says Mai Rosner from environmental NGO Global Witness.

"The price cap relies on the honesty of traders, shippers, and insurers to self-report the price paid for Russian oil," Rosner says. "These companies have little incentive or ability to act as administrators of sanctions and cannot be trusted to mark their own homework."

Sovcomflot informed Investigate Europe after publication that a reference to the website of the company Sun Ship Management was incorrect. This reference was removed on 15 March 2023

Author bio

Fuelling War is a joint investigation of Investigate Europe and Reporters United.

Data used for this series is from several sources. This includes shipment data from the Centre for Research on Energy and Clean Air (CREA), MarineTraffic and Datalastic. And individual ship / company / management information is from Equasis. Further information and underlying data can be accessed here.

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