The UK’s civil sanctions enforcement agency has opened investigations into at least 52 suspected breaches of Russian oil sanctions by companies but is yet to hand out any fines for wrongdoing. 

The UK and other Western countries introduced a ban on Russian oil and oil products in 2022 following Putin’s invasion of Ukraine. The oil price cap is an exception that allows British businesses to facilitate the transportation of Russian oil that is sold up to $60 per barrel. The mechanism is designed to restrict Russian revenue from oil but avoid spiking global energy prices.   

Bedford suspects any breach reports sent to OFSI are likely to be related to potential technical violations of the rules. ‘If you look through the conditions in the relevant general licence there are various attestations and similar requirements,’ he says. ‘I suspect those sorts of technical breaches are the type of breach that have been reported to the authorities because if oil is selling over $60 it’s probably doing so in a way that’s not easy to identify’. 

In September OFSI announced its first penalty related to financial sanctions imposed on Russia following its full-scale invasion of Ukraine. It fined a concierge company £15,000 for providing property management service to a sanctioned individual.  

Bedford is not surprised there have been no fines yet for oil price cap breaches because individual cases will be hard to prove and require thorough investigation and analysis. ‘I suspect there’s probably an element of wanting their first enforcement of the oil price cap to be an egregious breach not just a technical breach as that might seem harsh and not drive compliance in the manner they would hope,’ he says. 

The oil cap coalition, made up of the G7+ countries, issued an advisory in October warning companies in the maritime industry about ways vessels in Russia’s shadow fleet – non-western owned or insured tankers – are trying to evade sanctions. They said that the ships often have complex ownership structures and inflate shipping and ancillary costs to conceal that Russian oil was purchased above the price cap. 

In a report published in October, Kyiv School of Economics said the volume of oil sold above the price cap being transported by Russia’s shadow fleet is growing and in June reached 4.1 million barrels a day. 

Carl Newman, a white-collar partner at Withersworldwide in London and the Diversity and Inclusion Officer for the IBA’s Criminal Law Committee, says that OFSI’s limited resources will make it difficult for the agency to identify who is behind opaque corporate structures and shell companies involved in breaches of the oil price cap. ‘It will require a detailed investigation that needs a lot of time and resources,’ he says. ‘It can be an extremely complicated process to get to the bottom of who is behind a particular structure’. 

Chloe Cina, the former head of sanctions at Deutsche Bank and a senior associate fellow at national security think tank RUSI, believes the number of investigations OFSI has opened into suspected oil price cap breaches is ‘quite reasonable’ considering the agency has only been operational since 2016 and has had to quickly get to grips with complex new sanctions rules since the invasion of Ukraine. ‘Most Russia sanctions are novel and untested having been introduced for the first time in this regime,’ she says. ‘Implementation and enforcement of these measures require a level of expertise that may not have been available immediately in the government or industry’. 

OFSI has undergone a huge amount of restructuring following Russia’s invasion of Ukraine. In early 2022 OFSI had around 40 full-time employees and now it has approximately 140. The agency is made up of multiple teams including enforcement. 

Cina, who also handled Iran-related sanctions litigation at the Foreign and Commonwealth Office between 2014 and 2016, says the lack of published enforcement actions does not mean authorities aren’t trying to tackle sanctions evasion. ‘I do not think it is the case that enforcement agencies in the UK, US and EU are doing nothing – given the scale of sanctions evasion involving Russia and the fact that tackling circumvention is a top priority for these jurisdictions,’ she says. ‘On the contrary, there will be a number of different measures that come before enforcement, which can be more effective [..] these include using disruption tactics, and other diplomatic tools such as démarches’. 

The Foreign Commonwealth and Development Office has increasingly used sanctions designations to target those involved in undermining the oil price cap. The US – widely considered to be the western world’s most aggressive sanctions enforcer – has relied heavily on this approach. 

Gonzalo Saiz Erausquin, a research fellow and sanctions specialist at RUSI, says that while tactics such as disruption and designations make circumvention harder for Russia, the UK government is underestimating the value of strong enforcement to act as a deterrent. ‘In the end, we’re just forcing them to another alternative structure or jurisdiction; we’re not necessarily ending that activity,’ he says. 

A spokesperson from the Treasury told Global Insight that it would take enforcement action over sanctions breaches ‘where appropriate’ and works closely in collaboration with its partners in the G7+ coalition. They said that data from Russia’s Ministry of Finance shows that there was a 30 per cent reduction in Russian government tax revenues from oil in 2023 compared to 2022. 

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