On February 8, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the imposition of sanctions against a network of foreign entities and a vessel involved in an asserted price cap evasion scheme, including the following:
- Zeenit Supply and Trading DMCC (Zeenit);
- Talassa Shipping DMCC (Talassa);
- NS Leader Shipping Incorporated (NS Leader Shipping);
- Oil Tankers SCF Mgmt FZCO (Oil Tankers SCF); and
- The vessel NS Leader (IMO No. 9339301).
OFAC designated Zeenit, Talassa, NS Leader Shipping, and Oil Tankers SCF as Specially Designated Nationals (“SDNs”) pursuant to E.O. 14024 for operating or having operated in the marine sector of the Russian Federation economy. OFAC identified the NS Leader as property in which NS Leader Shipping has an interest.
OFAC determined that United Arab Emirates-based Zeenit and Talassa had engaged in shipping Russian oil using vessels that loaded in Russian ports in 2023, and that Zeenit and Talassa share a business manager and were founded within roughly a week of one another in July 2022.
In particular, OFAC found that in November 2023, Zeenit sold Russian Urals crude oil that was priced at over $80 per barrel, which exceeded the $60 per barrel limit under the price cap policy.
Zeenit delivered this oil using the NS Leader, which was found to have used services provided by a “covered U.S. person” during the voyage. The NS Leader, whose ultimate owner is the Government of the Russian Federation, made five port calls in Russian ports in 2023. UAE-based Oil Tankers SCF was identified as the ship manager for the NS Leader during the November 2023 voyage.
Price Cap Compliance and Enforcement Alert
OFAC’s enforcement announcement closely followed its February 1, 2024, publication of an Oil Price Cap Compliance and Enforcement Alert (the “Alert”) on behalf of the G7, European Union, and Australia (the “Price Cap Coalition”).
Building on prior guidance issued by OFAC and the Price Cap Coalition, including the Advisory for the Maritime Oil Industry published on October 12, 2023, the Alert provides an overview of key price cap evasion methods and sets forth recommendations for identifying such tactics and mitigating their risks, summarized below:
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Evasion Methods |
Guidance Recommendations |
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Falsified documentation and attestations |
Appropriate and Enhanced Due Diligence - Institutionalize sanctions compliance program and monitoring; - Institute Know Your Customer (KYC) and Know Your Customer’s Customer (KYCC) procedures; - Assess documentation risk; - Conduct enhanced due diligence (EDD) as may be appropriate; - Establish risk profiles or “whitelists” and conduct regular review. |
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Opaque shipping and ancillary costs |
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Third country supply chain intermediaries and complex and irregular corporate structures |
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Suspicious flagging activities |
Member notices, information sharing, industry resources |
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“Shadow” Fleet |
Conduct EDD; require continuous and appropriate insurance coverage (e.g., CLC liabilities); look for IACS classification. |
|
Voyage Irregularities |
Conduct enhanced monitoring of vessels and regions with voyage irregularities, AIS manipulation or illicit STS transfers; investigate irregularities; consider contractual revisions. |
The Alert also provides information on how to report suspected breaches of the price cap to each member of the Coalition.
The foregoing actions confirm that enforcement of the price cap policy remains a top priority for the United States government, as well as the other members of the Price Cap Coalition.
We will continue to closely monitor developments in this space.
If you have any questions regarding the matters covered in this e-mail, please contact Bruce Paulsen (212) 574-1533, Brian Maloney (212) 574-1448, Noah Czarny (212) 574-1642, Carmella O’Hanlon (212) 574-1351, or your primary Seward & Kissel attorney.