© Reuters. FILE PHOTO: Russian flag with stock graph and an oil pump jack miniature model are seen in this illustration taken October 9, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
By Timothy Gardner
WASHINGTON (Reuters) -The U.S., EU and UK are pressuring Liberia, the Marshall Islands and Panama to increase oversight of ships carrying their flags to ensure they do not transport Russian oil sold above the price cap, a source who has seen the communications to the countries said on Friday.
The move marks another escalation in the West’s efforts to enforce the $60 price cap on seaborne shipments of Russian oil it imposed to punish Moscow for its war in Ukraine.
The cap, which aims to reduce Russia’s export revenues while maintaining flows of oil around the world, was imposed in late 2022 but has only recently been enforced.
The mechanism bans Western companies from providing maritime services such as transportation, insurance and finance that facilitate the trade of Russian oil sold above the cap.
Russia has increasingly had to turn to a so-called “ghost fleet” of aging tankers to ship oil and avoid the cap. That fleet is transporting oil to countries including China and India, much further away than Russia’s traditional customer base and adding greatly to shipping costs.
Panama, the Republic of the Marshall Islands, and Liberia have allowed some of those ships to carry their flags, according to Lloyd’s List Intelligence and oil analysts. The practice, known as “flag hopping,” allows some shell companies that have been set up to trade Russian oil to sail with ships under those flags and dodge sanctions.
Lloyd’s List Intelligence has said nearly 40% of the about 535 dark-fleet tankers have registered ownership via companies incorporated in the Marshall Islands.
The letters warn the three countries of increased circumvention of the G7’s price cap on Russian oil and of the high level of risk attached to vessels that do not carry Western insurance and other services and that are seeking other flags, the source said. The three countries themselves are not at risk of Russian sanctions.
Embassies in Washington for the three countries did not immediately respond to requests for comment.
The goal of the pressure is to not reduce the number of ships carrying Russian oil on the water, but to tighten compliance on the cap and to make it more expensive for Russia to move oil without using Western shipping services. It also seeks to give leverage to countries buying oil outside the price-cap coalition to get discounted oil from Russia.
Panama has traditionally been responsive to U.S. requests to deal with illicit activity, the source added.
The group is asking Liberia and the Marshall Islands to increase awareness among those in the trade that its flag should not be used for tankers transporting oil priced above the cap.
The letters were signed by Lindsey Whyte, head of international finance at Britain’s Treasury, John Berrigan, head of the European Commission’s financial services unit, and Brian Nelson, the top terrorism financing official at the U.S. Treasury, the source said.
Reuters has not seen the letters in question. The U.S. Treasury, the British embassy in Washington and the Delegation of the EU to the U.S. did not immediately respond to requests for comment.
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