On 3 June 2022 the EU published its 6th package of sanctions against Russia, and the IG Clubs published a circular focusing the measures in the 6th package of sanctions which impact on the transport and insurance of oil and petroleum products; and the prohibitions on transacting with Russian state-owned enterprises.
Summary
- EU shipowners can carry Russian oil and petroleum products to third countries (so long as no sanctioned parties involved, including no “Article 5aa” ports).
- It is prohibited for EU insurers to insure the transport of Russian oil and petroleum products being carried to third countries. However, it is permitted to execute contracts concluded before 4 June 2022 until 5 December 2022. It is thought that it is the insurance contract which needs to have been concluded by 4 June for the exemption until 5 December 2022 to apply.
- EU shipowners are generally prohibited, subject to the exemptions set out in the Regulation, from carrying Russian oil into the EU. There is a corresponding insurance ban.
Transport and insurance of Russian oil and petroleum products
Pursuant to Article 3m of the Regulation, from 4 June 2022:
- It shall be prohibited to purchase, import, or transfer, directly or indirectly, crude oil or petroleum products, as listed in Annex XXV, if they originate in Russia or are exported from Russia.
- It shall be prohibited to provide, directly or indirectly, technical assistance, brokering services, financing or financial assistance or any other services related to the prohibition in paragraph 1.
Transport to the EU
Transport to the EU of Russian oil and petroleum products is now generally prohibited subject to the exemptions set out in Article 3m. “Transfer” is a broad concept which encompasses not only the movement of goods through customs controls but also the transport of goods. Russian oil transported together with oil of other origin in a mixed fashion is subject to these prohibitions.
The prohibitions in paragraphs 1 and 2 shall not apply:
- Until 5 December 2022, to one-off transactions for near-term delivery, concluded and executed before that date, or to the execution of contracts for the purchase, import or transfer of goods falling under CN 2709 00 concluded before 4 June 2022, or of ancillary contracts necessary for the execution of such contracts, provided that those contracts have been notified by the relevant Member States to the Commission by 24 June 2022 and that the one-off transactions for near-term delivery are notified by the relevant Member States to the Commission within 10 days of their completion;
- Until 5 February 2023, to one-off transactions for near-term delivery, concluded and executed before this date, or to the execution of contracts for the purchase, import or transfer of goods falling under CN 2710 concluded before 4 June 2022, or of ancillary contracts necessary for the execution of such contracts, provided that those contracts have been notified by the relevant Member States to the Commission by 24 June 2022 and that the one-off transactions for near-term delivery are notified by the relevant Member States to the Commission within 10 days of their completion.
Insurance of the transport into the EU
Insurance (or reinsurance) of the transport into the EU of these goods is also prohibited subject to the exemptions in Article 3m as “financial assistance” is defined to include “all types of insurance and reinsurance”.
If operators can rely on any of the exceptions mentioned above, then an insurer subject to EU jurisdiction can also provide insurance for such voyage, subject to applicable terms and conditions, as insurance would be deemed as being a necessary ancillary contract.
Transport to a third country
The EU has clarified that Article 3m of the Regulation prohibits only the purchase, import, and transfer where the cargo is destined for import into Member States. It does not prohibit the transport of crude oil or petroleum products when exported from Russia to a third country.
A company incorporated or constituted under the law of a Member State is still therefore generally permitted to transport Russian crude oil and petroleum products to a third country. Caution should however be exercised to ensure that sanctioned entities are not involved in the trade, including the state-owned enterprises which are listed in Annex XIX of the Regulation. Further, the insurance and reinsurance of this trade by an insurer or reinsurer that is subject to the jurisdiction of the EU is generally prohibited.
Insurance of the transport to third countries
Article 3n of the Regulation provides that:
- It shall be prohibited to provide, directly or indirectly, technical assistance, brokering services or financing or financial assistance, related to the transport, including through ship-to-ship transfers, to third countries of crude oil or petroleum products as listed in Annex XXV which originate in Russia, or which have been exported from Russia.
- The prohibition in paragraph 1 shall not apply to: (a) the execution until 5 December 2022 of contracts concluded before 4 June 2022, or of ancillary contracts necessary for the execution of such contracts; or (b) the transport of crude oil or petroleum products as listed in Annex XXV where those goods originate in a third country and are only being loaded in, departing from, or transiting through Russia, provided that both the origin and the owner of those goods are non-Russian.
Transacting with Russian state-owned entities
Pursuant to Article 5aa of the Regulation it is prohibited for anyone subject to EU jurisdiction “to directly or indirectly engage” in any transactions with certain Russian state-owned entities listed in Annex XIX of the Regulation. The prohibitions extend to any legal person, entity or body established outside the EU whose proprietary rights are directly or indirectly owned for more than 50 % by an entity listed in Annex XIX; and to any legal person, entity or body acting on behalf or at the direction of an entity referred to.
Prohibitions shall not apply:
- Unless prohibited under Article 3m or 3n, transactions which are strictly necessary for the direct or indirect purchase, import or transport of natural gas and oil, including refined petroleum products, as well as titanium, aluminium, copper, nickel, palladium and iron ore from or through Russia into the Union, a country member of the European Economic Area, Switzerland, or the Western Balkans;
- Transactions related to energy projects outside Russia in which a legal person, entity or body listed in Annex XIX is a minority shareholder;
- Transactions for the purchase, import or transport into the Union of coal and other solid fossil fuels, as listed in Annex XXII until 10 August 2022;
- Transactions, including sales, which are strictly necessary for the wind-down, by 5 September 2022, of a joint venture or similar legal arrangement concluded before 16 March 2022, involving a legal person, entity or body referred to in paragraph 1;
- Transactions related to the provision of electronic communication services, data center services, and the provision of services and equipment necessary for their operation, maintenance, security, including the provision of firewalls, and call center services, to a legal person, entity or body listed in Annex XIX.
