Loophole In Vessel Ban To Keep Russian Energy Supplies Flowing Into UK

• Moves by the UK and EU to ban Russian vessels from entering port will need to take account of thousands of Russian affiliated and beneficially owned entities.
• This is to block an average monthly volume of 829 Russian-affiliated vessels currently calling in UK and EU ports.

A recent news article published in the Riviera states that Russian shipping blacklist revealed as EU readies port ban.

Russian vessels blocked

GOVERNMENTS seeking to block vessels owned or controlled by Russian interests from entering ports will have to track a global list of 6,448 vessels, according to Lloyd’s List Intelligence data.

That list includes all vessels either flagged, owned or operated by entities based in Russia, including those beneficially owned rather than simply registered behind brass plate companies for tax purposes.

While the total fleet of vessels with Russian beneficial ownership links is vast, international scrutiny is likely to focus on the much smaller priority list of 429 internationally trading vessels over 10,000 dwt.

Nearly 20% of these vessels are crude oil tankers. Bulk carriers and product tankers account for 16% and 12%, respectively.

Britain has banned Russian owned, operated, controlled, chartered, registered or flagged ships from entering UK ports and issued legislative backing to the order, prompting at least 20 Russian vessels to immediately deviate or anchor awaiting orders.

Russian cargoes will not be targeted

The UK Department for Transport has today confirmed that while the Secretary of State retains the right to make exception, Russian cargoes will not be targeted by the ban, effectively allowing non-Russian affiliated vessels to load in Russian ports and discharge in the UK.

The UK ban, which entered into force at 1500 hrs GMT on March 1, was swiftly followed by the European Parliament adopting a resolution on Tuesday calling for European Union ports to similarly block Russian vessels from entering.

Crucially, this call went further to specify that the ban should include “ships whose last or next port of call is in the Russian Federation, except in the case of necessary justified humanitarian reasons”.

While the resolution is not legally binding in its current format, the Parliament will now pressure EU member states, which can take such decisions by qualified majority, under the same procedure as the economic sanctions.

Lloyd’s List understands that several key EU member states are pushing hard for the sanctions to be adopted urgently.

Canada has also implemented a ban on Russian vessels entering ports.

According to Lloyd’s List Intelligence vessel tracking data, around 256 ships are currently scheduled to arrive from Russia in EU ports by April 7.

Approximately 200 vessels are currently scheduled to head to Russia, having called at either a UK or EU port. However, rapid voyage diversions have become standard practice over the past week.

In 2021 UK and EU ports collectively received an average monthly volume of 829 Russian-affiliated vessels.

As of Wednesday morning, only nine Russian-owned or controlled vessels were still signalling UK as their destination and only one Russia-flagged vessel, the chemical tanker Tecoil Polaris (IMO: 8883290), remained in the port of Hull. At least a dozen Russian-controlled vessels had been anchored off the UK coast in the immediate aftermath of the ban taking effect, but by Wednesday afternoon all have diverted, largely to European ports.

In 2021, 149 ports in the UK received Russian-affiliated vessels, with Immingham the most popular destination for Russian-owned traffic and the most common types of vessels being small general cargoships.

The UK Department for Transport is understood to be in the process of drawing up a blacklist of all vessels to be denied entry into UK ports that will quickly be distributed to harbour masters and port officials.

The UK legislation published on Tuesday allows the Secretary of State “to control the movement of Russian ships, or specified ships, by requiring them to leave or enter specified ports, proceed to a specified place or remain where they are”.  It also includes powers to detain Russian vessels and to direct them out of British ports, although the DfT has stated that these powers would be applied on a case-by-case basis where needed, and in close discussion with the port.

Lloyd’s List understands that the UK ban has sparked a series of urgent calls from UK ports seeking clarification over the orders.

The UK National Grid has already challenged the DfT over whether the ban applies to shipments of liquefied natural gas. The decision over LNG imports may require sign-off from the Business, Energy and Industrial Strategy (BEIS) department and the National Grid has raised concerns that it has legal and contractual obligations to receive vessels and does not have any control over the origin of the LNG they contain.

The UK received 3.91m cu m of LNG from Russia between February and December last year, about 17% of the nation’s entire imports of the supercooled fuel for the period, according to data from Lloyd’s List Intelligence’s LNG trade report.

Russian-affiliated LNG has already started diverting away from the UK. The Christophe De Margerie (IMO: 9737187), owned by sanctioned Russian operator Sovcomflot, had been scheduled to arrive at the Isle of Grain terminal from Russia on March 4 but Lloyd’s List Intelligence showed its destination changed to France immediately after the UK ban was announced by Transport Secretary Grant Shapps on the social media platform Twitter.

Crude oil imports

Russia supplied the UK with approximately 3.61m tonnes of crude oil in 2021. This accounts only for 1.4% of total Russian oil exports, as per data from Lloyd’s List Intelligence APEX.

The rapid introduction of the ban has left industry officials, individual companies and several senior government officials struggling to keep up with the commercial implications of changes being announced.

“The impact of vessels not being allowed into UK ports is that owners and cargo interests are struggling to work out what to do with their vessels and cargoes. Payment is becoming difficult and is likely only to get worse as matters progress. Credit terms need to be considered carefully,” warned Sally-Ann Underhill, shipping partner at global law firm Reed Smith.

“But the issues go much further. War risk clauses, safe port provisions and force majeure / exceptions clauses are all coming under scrutiny. Owners with Russian crew on board are considering what steps they need to take and what difficulties they may face at certain ports. And those with Ukrainian crew on board are facing issues when their crews ask to be repatriated.

“Redelivery is also becoming an issue again as rates rise and charterers decide to keep vessels even when notices of redelivery have been tendered.”

Meanwhile, the exodus of shipping businesses rapidly extricating themselves from Russian-affiliated business continued apace on Wednesday.

Bunker Holdings, the marine fuel supplier convicted of breaching Syria sanctions last year, has completely pulled out of Russia.

“Bunker Holding and its affiliates have suspended all trade with Russian counterparties. This goes for any Russian company, state operated as well as privately owned, along with companies with links, ties, or affiliation to a Russian ownership,” a statement issued to Lloyd’s List explained.

Commodities trader Trafigura, meanwhile, has frozen investments in Russia and is “reviewing the options in respect of our passive shareholding in Vostok Oil in which we have no operational or managerial input”.