G7 leaders discuss further Russian shipping sanctions

Leaders of the Group of Seven (G7) nations are meeting in Hiroshima and discussing further shipping-related sanctions on Russia.

New measures announced by the leaders during the May 19-21 meetings will target sanctions evasion involving third countries, and seek to undermine Russia's future energy production and curb trade that supports Russia's military. An official announcement on the shipping-related sanctions from the group is expected on Sunday.

The G7 includes Japan, the United States, the United Kingdom, France, Germany, Canada and Italy, as well as the European Union. Also due to touch down in Japan for talks is Ukrainian president Volodymyr Zelenskyy.

US sanctions due to be announced this weekend would cut off roughly 70 entities from Russia, and other countries, from receiving US exports by adding them to the commerce blacklist. And there will be upwards of 300 new sanctions against individuals, entities, vessels and aircraft.

In the lead up to the summit, Britain's prime minister, Rishi Sunak, announced a UK ban on imports of Russian-origin copper, nickel and aluminium, with other G7 members expected to follow suit.

The UK has today announced a new wave of sanctions against Russia, targeting businesses and individuals connected to Russia's capacity to fund and wage the war.

The 86 designations target individuals and organisations connected to Russia's energy, metals, defence, transport, and financial sectors.

This includes a crackdown on what an official British government release described as the "shady" individuals and entities connected to the theft and resale of Ukrainian grain, as well as targeting Russia's major energy and arms shipping companies.

Companies connected to Rosatom, which are producing advanced materials and technology, including lasers, have also been sanctioned.

A total of 24 individuals and entities connected to Russia's transport services, have also been sanctioned by the UK today. This includes Pawell Shipping, the State Grain Corporation (GZO) and its director Nikita Busel who are connected to what the UK government described as the "systematic theft" of Ukrainian grain.

Six major Russian shipping companies which have enabled and supported Putin's wartime economy have also been sanctioned by the UK. This includes Sun Ship Management, an entity connected to Sovcomflot, Russia's largest state-owned shipping company.

The European Union, meanwhile, has proposed prohibiting access to its ports for vessels that attempt to circumvent sanctions on Russian oil as it seeks to deter transport of its crude and products below the price caps set by the G7.

With price caps on Russian crude and petroleum products already in place, the focus by the EU is now on closing loopholes and more effective enforcement of the restrictions.

The EU has cited a "sharp increase in deceptive practices, and related environmental risks" by vessels trying to circumvent the G7 price cap and a ban on imports of Russian oil to the bloc. Vessels that are suspected or found in breach of the sanctions by engaging in ship-to-ship transfers should be banned from European ports and locks, it has said.

The breakdown of laden tanker Canis Power earlier this week in the Danish straits, a ship belonging to the so-called dark fleet, has added to impetus among European countries keen to clamp down on the growth of the vintage, often poorly maintained fleet hauling Russian cargoes through the continent's waters.

As part of the planned next round of EU sanctions, the bloc has also proposed targeting vessels that switch off navigation systems.

Earlier this week, the US Department of the Treasury's Office of Terrorist Financing & Financial Crimes and Office Economic Policy released a progress report that claimed to underscore the price cap on Russian oil's success in achieving its dual goals: reducing Russia's revenue and keeping the global energy market stable.

According to the Russian Ministry of Finance, federal government oil revenues from January to March of 2023 were over 40% lower than a year prior. This is Russia's single most important source of federal revenue. Before the war, oil revenues constituted 30–35% of the total Russian budget. In 2023, oil revenues have fallen to just 23% of the Russian budget, the American report stated.

This decline in revenue has occurred despite Russia's exporting roughly 5 to 10% more crude oil in April 2023 compared to March 2022.

In response to the price cap, Russia has been forced to alter the way it taxes oil such that it institutionalises the discounted value of Russian crude—essentially writing into law the steep discount the price cap has helped cement.

"Despite widespread initial market skepticism around the price cap, market participants and geopolitical analysts have now acknowledged that the price cap is accomplishing both of its goals," the US Treasury stated.

Splash will be bringing readers updates from the G7 summit on Monday.