EU Sanctions Guide: The EU 11th Sanctions Package and How to Ensure Maritime Compliance

Report

Regulatory bodies in both the European Union and the US target the shipping industry to ensure compliance with EU 11th sanctions package against Russia.

Addressing gaps and evasive manoeuvres within the existing framework, the EU’s 11th sanctions package takes a comprehensive approach that encompasses activities by entities in third-party nations. Key for sanction enforcement is increased accountability and transparency within the shipping industry. To stay compliant, organisations within this industry must be able to detect deceptive shipping practices (DSP) such as (Automatic Identification System) AIS manipulation, illegal ship-to-ship (STS) transfers, and flag hopping.

At Pole Star Global, we stand ready to provide unwavering assistance to individuals and entities operating in the maritime sector. This encompasses shippers, importers, exporters, Beneficial Cargo Owners (BCOs), forwarders, and financial institutions. Our vessel sanction screening software, PurpleTRAC, and our Maritime Domain Awareness (MDA) solution will give you full transparency of your marine assets and logistics. You’ll gain real-time port and vessel activity monitoring, vessel behaviour analysis, plus illicit activity surveillance and investigations.

Pole Star Global helps you stay compliant to avoid regulatory fines and legal action risk.

We’re committed to helping you maintain continued compliance with EU sanctions, and as such, this guide details the key elements of the 11th sanctions package and underscores its significance within the maritime industry. Furthermore, we elucidate the critical actions that must be taken to adhere to the EU’s stringent guidelines. To empower you with an advanced understanding, we then address your most pressing questions regarding the 11th sanctions package.

What are EU sanctions?

EU sanctions are measures imposed by the European Union (EU) against countries, entities, individuals, or groups in response to various violations of international law, human rights abuses, or threats to international peace and security. These sanctions can take various forms, including:

  • Diplomatic Sanctions: These may involve the expulsion of diplomats or the withdrawal of ambassadors.
  • Economic Sanctions: These can include trade restrictions, embargoes, or financial sanctions such as freezing assets or blocking transactions with designated individuals, entities, or countries.
  • Arms Embargoes: These prohibit the export, import, or transfer of arms and related materials to certain countries or entities.
  • Travel Bans and Visa Restrictions: These prevent certain individuals or groups from traveling to EU member states or obtaining visas.
  • Asset Freezes: These involve freezing the assets of individuals, entities, or organisations linked to sanctioned activities, thus preventing them from accessing their funds or assets held within the EU.

EU sanctions are typically imposed in coordination with other international bodies such as the United Nations or in response to EU-specific concerns. Sanctions are used as a tool for promoting compliance with international norms, deterring undesirable behavior, or addressing security threats. They are often part of a broader diplomatic and foreign policy strategy aimed at resolving conflicts, promoting human rights, and maintaining international peace and security.

What is the EU 11th sanctions package?

On the 24th of June 2023, the European Union adopted an 11th package of sanctions against Russia to clamp down on circumvention and to extend the scope of existing sanctions. New trade, transport, and energy measures have been introduced to limit Russia’s ability to wage a crime of aggression against Ukraine.

The importance of the EU sanctions package in the maritime industry

The focus of EU sanctions and their enforcement is progressively shifting toward the maritime sector. Shipping plays a central role in facilitating intercontinental trade, and the movement of essential raw materials such as petroleum. Hence, upholding adherence to the latest EU sanctions within the shipping industry is particularly vital for curtailing the flow of goods and services between the EU and Russia, especially in regard to Russia’s petroleum, which contributed a substantial 45% to the Russian Federal budget in 2021 – financially supporting Putin’s regime and its actions against Ukraine.

Russian P&I Clubs insure 149 Vessels only with Ingosstrakh being the largest insurer

Russian P&I Clubs insure 149 Vessels only with Ingosstrakh being the largest insurer. There are other insurers other than Ingosstrakh not more than 3%, including Absolute Insurance, AlfaStrakhovanie, Rosgosstrakh, SOGAZ Insurance, and Soglasie Insurance.

Unusual and remarkably high trade figures for particular products and countries give clear evidence of Russia’s deliberate efforts to evade sanctions. This calls for actors within the maritime industry to redouble efforts to identify and stop deceptive shipping practices (DSP).

Why stricter EU sanctions are needed to tackle circumvention and deceptive shipping activities

Of relevance to the maritime industry, key sanctions target DSP and are introduced as transport measures.

Most notably, critical sanctions imposed on Russia include:

  1. An entry ban on Russian-flagged vessels to EU ports (with effect from 16 April 2022);
  2. A ban on imports from Russia to the EU of crude oil (from December 2022) and other refined petroleum products (from February 2023);
  3. The G7 Coalition oil price cap. This cap establishes price limits for seaborne Russian oil products, with high-value exports like diesel and gasoline capped at $100, and lower-value products like fuel oil capped at $45.

To circumvent these sanctions, there’s evidence of DSP, and those of most concern include:

  1. Using flags of convenience and reflagging practices to evade introduced restrictions;
  2. Illegal STS of Russian crude oil and diesel;
  3. The disabling and manipulation of automatic identification systems (AIS) and tracking systems.

Though formal data on such practices is limited, several instances have been reported in the media.

For instance, during the early stages of the war, there were notable instances of ships abandoning their Russian flags and re-registering under countries like the Marshall Islands. For instance, Russia’s state-owned Sovcomflot – the country’s largest shipping company – is believed to have transferred its fleet to a Dubai-based shipping company. This company is thought to have been owned by “United Arab Emirates and Russian nationals” and operates a fleet of “Liberian and Cypriot-flagged” ships. This company has emerged as a significant carrier of Russian oil exports.

Russian Maritime Register (as of July 2023)

Russian maritime register (as of July 2023). Ship Status – In Service / Commission, In Casualty or Repairing, and vessels over 500GT. Ship types –  Dry Cargo, Tankers, Miscellaneous, Offshore, Tankers, Bulk Carriers. Pole Star’s Purple Trac has a custom watch list for this

Additionally, there have been reported cases of Russian-affiliated oil tankers disabling their AIS. Such ships are referred to as “dark fleets” or “shadow fleets”. These vessels operate covertly, evading the watchful gaze of conventional shipping oversight. Falling beyond the attention of established flag states and respected port state services, shadow fleets pose a looming environmental and safety risk.

Exemplifying the perils associated with these hidden fleet operations is the Pablo tanker incident that occurred on May 1st 2023. As a member of the so-called “shadow fleet,” the Pablo tanker was reportedly engaged in transporting sanctioned oil globally. Over the past year, the ship’s flag was repeatedly changed due to its connection to illicit Iranian oil trading, (Iran’s ‘ghost fleet’ transports Russian oil). This incident underscores the repercussions tied to unauthorised STS transfers, obscured vessel identification, and fraudulent ship registration.

EU sanctions list: Breaking down the contents of the 11th EU sanctions package

The 11th package of sanctions against Russia has been adopted by the European Union in response to its ongoing illegal war against Ukraine. The package was agreed upon by the European Union on the 31st of May 2023 and came into force on the 24th of June 2023.

New measures aim to ensure greater scrutiny and prevent the circumvention of sanctions. Introduced measures are grouped under Trade Measures, Transport Measures, and Energy Measures. For more information on these key elements, complete the form below to download our 11th EU Sanctions Package (Key Elements). This information has been obtained from the European Commission and rephrased to give further clarity.

Download our 11th EU Sanctions Package (Key Elements)


Preventing circumvention of EU sanctions in shipping: Steps to ensure compliance

The latest EU sanctions update was partly motivated by the increase in DSP, which includes STS transfers, location (AIS) manipulation, flag hopping, and dark activity, as previously mentioned. Logistic service providers, shipping companies, importers and exporters, Beneficial Cargo Owners (BCOs) and forwarders, and port authorities play a vital role in ensuring sanctions against Russia remain effective in limiting Russia’s ability to wage a crime of aggression against Ukraine.

Relevant entities must ensure they have the essential data and insights required not only to comply with the above-mentioned EU sanctions but also to exceed the required measures. To achieve this, they should have access to automated alerts for the mentioned DSPs and possess full visibility and tracking capabilities throughout a vessel’s entire journey.

Every shipper and logistics service provider (LSP) must be fully informed about the updated sanction boundaries and take the following steps:

  • Establish protective measures in line with EU Sanctions Package 11.
  • Evaluate whether the goods being shipped are covered by the prohibition, using CN codes as a reference.
  • Develop a systematic process to screen vessels and businesses operating within Russia.
  • Monitor container routes from pre-departure to destination to ensure they do not pass through Russia.
  • Recognize warning signs of potentially illicit activities or manipulations of AIS data.
  • Seek contractual guarantees from relevant counterparties, potentially incorporating verification procedures when necessary.

With this in mind, below we detail how you can ensure compliance against EU transport measure sanctions relevant to the maritime industry. Integrating the appropriate technology plays a pivotal role in ensuring adherence to EU sanctions. With this in mind, we explain how you can adopt Pole Star Global’s PurpleTRAC and Maritime Domain Awareness (MDA) solutions to uphold the requisite accountability and transparency necessary for compliance.

EU Sanctions list: Transport sanction #1

Sanction: Prohibition to access EU ports for vessels that engage in STS transfers suspected to be in breach of the Russian oil import ban or G7 Coalition price cap.

Illicit actors have adopted deceptive tactics to bypass the G7 Coalition oil price cap. Concealing the origin of oil and other sanctioned commodities poses a significant challenge for regulators.

Russia is facilitating exports of crude oil and diesel by establishing illegal STS transfer hubs in international waters. Identified hubs include the waters off Gibraltar, Kalamata, South Korea, and West Africa. For instance, using Pole Star’s Global risk intelligence solution PurpleTRAC, we can visualise an increase in the number of ships around West Africa, which our analysts suggest is indicative of a potential rise in STS transfers.

For more detailed information about illicit STS transfers around key zones and ports, register for a walkthrough of our PurpleTRAC solution.

Illegal STS transfers must be curtailed as they impose an increased risk of spills and high-cost environmental clean-ups. To ensure compliance with transport sanction #1, your aim is to identify illicit STS transfers which could indicate illegal crude oil and diesel smuggling. For compliance, you must:

  1. Accurately differentiate between legitimate and illicit STS operations.
  2. Ascertain the origin of the oil onboard the vessel in question to verify whether it came from Russia.

Distinguishing illicit activities from legal STS transfers is critical. Vessels that have resorted to deceptive manoeuvres will execute STS operations in non-designated transfer areas, often under challenging weather conditions, all in a bid to obscure their actions.

Counteracting this behaviour, Pole Star’s MDA technology gives complete visibility over whether a vessel is engaged in a STS transfer, and if so, where. In addition, we give 30 days of historical and 5 days of forecasted meteorological conditions on an interactive map, so you can see whether STS transfers took place in adverse weather conditions.

Next, using PurpleTRAC you can uncover gaps, mid-sea vessel stationary periods, and possible STS cargo transfers with instantaneous draught-change notifications. Obtained +1800 watchlists access, and create your own proprietary watchlists to keep a check on potential STS zones, vessels, and regions. Use our Deep Blue customer reports which give vessel intelligence and insights, training with experts, and walkthroughs.

PurpleTRAC delivers fewer false positives than the industry standard, making sure only illicit activity is flagged.

EU Sanctions list: Transport sanction #2

Sanction: Prohibition to access EU ports for vessels if a vessel does not notify the competent authority at least 48 hours in advance about a STS transfer occurring within the Exclusive Economic Zone (EEZ) of a Member State or within 12 nautical miles from the baseline of that Member State’s coast.

To ensure compliance with transport sanction #2, you must:

  • Receive automatic alerts for containers and ships passing through Russian and other sanctioned zones.
  • Have complete visibility of transshipments and a vessel’s journey.

Pole Star’s MDA solution gives full visibility of your marine assets and logistics, monitoring both vessel and port activity. By utilising secure LRIT (Long-Range Identification and Tracking), VMS (Vessel Monitoring System), and SSAS (Ship Security Alert System) data, along with satellite and terrestrial-based AIS data, our patented tracking technology creates a hybrid track of vessel movement for optimal visibility. Utilise current industry and environmental zones, encompassing ECAs, EEZs, high-risk regions, as well as environmental and regulatory zones. Plus, craft your unique zones to monitor your fleet’s proximity to imminent threats, regional vulnerabilities, and prevailing regulatory demands.

Use Pole Star Global’s PurpleTRAC solution to receive automotive notifications about any vessel sailing through Russian or other sanctioned waters. Subsequently, you’ll obtain a comprehensive list of the vessels, ports, and container lines associated with the bill of lading delivery giving you full transshipment visibility.

EU Sanctions list: Transport sanction #3

Sanction: Prohibition to access EU ports for vessels that manipulate or turn off their navigation tracking system when transporting Russian oil subject to the oil import ban or G7 price cap.

Vessels may disconnect their GPS from the AIS transponder to hide various potentially nefarious activities, such as illegal Russian-related trade. Vessels engaged in such behaviour are referred to as dark fleets or shadow fleets. Detecting such actions poses a challenge without the aid of real-time AI technology.

To ensure compliance with transport sanction #3, you must:

  • Be able to detect dark activities and location (AIS) manipulations.
  • Receive real-time alerts of dark activities and location (AIS) manipulation.
  • Identify dark fleet vessels.
  • Identify reflagging practices.
  • Identify the owner of a vessel.
  • Determine whether the company that owns a vessel sits in a sanctioned country.

Using Pole Star’s PurpleTRAC solution, you’ll be able to carry out a thorough screening of vessels involved in a transaction, along with their ownership and management connections, port state control history, and Bills of Lading. This screening can then be cross-referenced against sanctions and enforcement action watchlists. For instance, refer to the image below which shows how PoleStar’s PurpleTRAC solution can detail vessel-related sanctions and watchlists.

In addition, Pole Star Global’s pioneering technology allows you to monitor a ship’s records, real-time movements, and any instances of dark activity. You’re alerted with instantaneous notifications about high-risk points of call or suspicious behaviour that might indicate potential illicit activity. With this in mind, Pole Star Global provides vessel and company screening that gives 90% fewer false positives on shadow fleets than our competitors.

And finally, our screening service will indicate whether a vessel has previously sailed under the Russian flag and/or companies located in sanctioned countries, while adjacently illuminating instances of flag hopping. The image below shows the identification of flag hopping using Pole Star’s PurpleTRAC solution.


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EU sanctions map

EU Sanctions Map

U.S. sanctions on Russia and response to EU measures

The 11th set of sanctions gives the European Union a resolute and assertive approach to imposing penalties on Russia. In response, the United States has adopted additional measures to translate the commitments outlined by G7 leaders on February 24, 2023 into action. The recent designations announced by the Office of Foreign Assets Control (OFAC) and the Department of State are meticulously crafted to hinder Russia’s access to resources that sustain its military and wartime endeavours. These designations also seek to diminish the revenue derived by Russia from its metals and mining sector, erode its potential energy capacities, restrict its foothold within the international financial system, and strip Russia of the vital technology emanating from G7 nations, which plays a pivotal role in its technology, aerospace, and defence domains.

Of relevance to the maritime industry, the impacts of imposed U.S. sanctions on Russia must be understood. Vessels flying the Russian flag are explicitly prohibited from entering ports located in the United States, the United Kingdom (UK), and the European Union. Concurrently, tankers linked to, owned by, or chartered by Russia are prohibited from entering both the UK and North America. In a further step, the United States has enforced a ban on the transportation of Russian oil cargoes since April 22, 2022, aligning with the deadline of Executive Order 14066.

The U.S. has been methodically intensifying its endeavours to counter actions subject to sanctions over the years. Commencing in 2018, the U.S. government has issued a series of maritime advisories, with the most significant being the Global Maritime Advisory released in May 2020. This was subsequented by an IG P&I Circular issued in early February 2022.

Aiming to fortify the impact of these actions, the U.S. Department of Justice (DOJ) has instituted Task Force KleptoCapture, an interagency law enforcement unit dedicated to enforcing the comprehensive sanctions, export restrictions, and economic countermeasures imposed by the United States and its partners in response to Russia’s unprovoked military incursion into Ukraine. This task force will possess full authority to leverage advanced investigative techniques, including data analytics, cryptocurrency tracking, foreign intelligence sources, and information from financial regulators and collaborators from the private sector. Although the term “private sector partners” remains undefined, it is foreseeable that the U.S. government will persist in soliciting support from flag states, shipowners, classification societies, and third-party vendors in their efforts to combat sanctions evasion.

Answering your questions on the 11th EU sanctions package

Who is being sanctioned?

EU sanctions now encompass more than 1800 individuals and entities, and are directed at those involved in activities that undermine Ukraine’s territorial integrity, sovereignty, and independence. An additional 71 individuals and 33 entities have been introduced to the newly updated 11th Sanctions Package.

Among those subject to new measures are Russia’s President, Vladmir Putin; the ranks of the Russian State Duma (the parliamentary lower house); members of the National Security Council; ministers, governors, local politicians including Moscow’s mayor; high-ranking officials and military figures; along with prominent business personalities and oligarchs.

Entities subject to sanctions include banks and financial institutions; military and defence enterprises, such as Russia’s private military – the Wagner group; aviation, shipbuilding, and machinery sectors; armed forces and paramilitary groups; political parties, notably the “All-Russia People’s Front”, and media outlets dealing in propaganda and disinformation, such as the Russian media organisation RIA FAN.

Who must comply with EU sanctions?

EU sanctions typically have scope in the following areas:

  • Inside the EU’s territory and its airspace.
  • Aboard aircraft or vessels under the control of a Member State.
  • For legal entities, organisations, or bodies, whether within or outside the EU’s territory, if they’re established under the laws of a Member State.
  • Relating to any legal entity, organisation, or body engaged in business activities either fully or partially within the EU.

More specifically, sanctions apply to businesses and government agencies within the UK, EU, and US (plus any other relevant jurisdictions), with a particular focus on financial, energy, and defence sectors connected to a contract involving Russia. This group encompasses importers and exporters, Beneficial Cargo Owners (BCOs) and forwarders, logistic service providers, shipping companies, importers and exporters, and port authorities.

Insurers and banks operating under EU sanctions jurisdiction could face exposure if they provide financing or insurance for prohibited transit activities.

To mitigate risks, compliance officers, risk management personnel, and legal counsels should establish company policies. This task extends to senior logistics teams, who need to incorporate these policies into contracts and devise monitoring procedures to ensure goods do not transit through Russia.

Who enforces the EU sanctions?

The task of upholding consistent sanctions falls to the European Commission. Once sanctions have been established, the European Commission takes on the role of facilitating their execution and clarifying any queries about their interpretation from economic operators.

What is meant by a “transit” via Russia?

Transit restrictions encompass the prohibition of port visits within Russia (both along the East and West Coasts), transit through Russian territorial waters and the Exclusive Economic Zone (EEZ), and the movement of cargo through rollovers or transshipments via Russian territory.

What are the consequences of violating the EU sanctions?

Across the majority of EU member states, invading EU sanctions could lead to severe criminal repercussions, including potential imprisonment for company executives, substantial fines, cargo confiscation, and more. Additionally, administrative sanctions might apply, encompassing fines, revocation of export licences, and similar measures.

Stay Ahead in the Evolving Compliance Landscape with Pole Star Global

Regulatory changes occur every 12 minutes. Staying informed and atop of these changes is paramount. With this in mind, Pole Star Global works to remain at the forefront of the ever evolving regulatory environment to serve our customers, and to give them the accountability and transparency they need to always be compliant. This guide serves as your single touchpoint to keep ahead of EU sanctions on Russia. We’ll answer your questions and address updates as they arise, so stay tuned.

You need the right technology behind you when navigating the complex regulatory waters of the maritime industry. As an industry leader, Pole Star Global’s pioneering technology ensures you remain at the forefront of maritime insights and we’ll empower your real-world decisions. We’ll help you identify illegal STS transfers, and instances of flag hopping, plus we give you real-time visibility of vessel and container movement. As such, Pole Star Global technology is key in ensuring you have the right information to offer unwavering support to global allies, spanning political, financial, military, and humanitarian realms.

Accountability and transparency are crucial for compliance within the maritime industry. Plus, organisations must be able to quickly and easily share information. If you’re not able to do either, then it’s time for a technology upgrade. Pole Star Global is your compliance solution. Book a demo with a member of our team to see how our PurpleTRAC and MDA solutions can work for you.

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