THE EUROPEAN Union has targeted Russian tanker giant Sovcomflot’s Dubai-based management operations in its latest round of sanctions, along with Russia’s main reinsurer of Russian ships and the company behind its icebreaker fleet.

The final text of the tenth round of sanctions against Russia was agreed late Friday night amid intense last minute negotiations between EU sates that ultimately saw a watered down package confirmed as the world marked the first anniversary of Vladimir Putin’s incursion into Ukraine.

The inclusion of SUN Ship Management (D) Limited, the Dubai-based operational arm of Sovcomflot with 92 crude oil, LNG and chemical tankers under its management, was initially thought to have been removed on the grounds that targeting a third-country entity would prove legally difficult, but details published in the EU Official Journal on Saturday confirm that the company is now a named target.

The EU text states that since the start of Russia’s incursion into Ukraine, Sun Ship Management (D) Ltd has been operating as one of the key companies managing the maritime transport of Russian oil.

“Such services provide a substantial source of revenue to the government of the Russian Federation, accounting for more than 70 % of Russia’s energy revenue, thereby enabling the Kremlin to finance its war of aggression against Ukraine,” read the final text of the EU sanctions package.

“Therefore, SUN Ship Management (D) Ltd is an entity supporting, materially and financially, and benefitting from the government of the Russian Federation. Moreover, SUN Ship Management (D) Ltd is an entity involved in an economic sector providing a substantial source of revenue to the government of the Russian Federation.” 

Sovcomflot has already insisted that the “activity of Sun Shipmanagement (D) Ltd is completely legitimate because no vessels are carrying their cargoes into the EU unless expressly permitted by EU respective regulations”.

Cyprus had previously flagged four of the vessels operated by Sun Ship Management, but removed that status on February 15 before the sanctions were formally agreed.

Also included in the final sanctions text were two other significant maritime entities: the Russian National Reinsurance Company JSC and Atomflot.

RNRC is a Russian state-controlled subsidiary of the Bank of Russia and functions as the main reinsurer of Russian ships responsible for the export of Russian oil.

That includes Sovcomflot’s fleet after western insurance firms withdrew cover for Russian shipowners in the wake of the western sanctions.

“This reinsurance service offered by the RNRC has enabled the Russian Government to deflect and mitigate the impact of western sanctions on its oil trade — which provides a substantial source of revenue to the government of the Russian Federation,” explained the EU sanctions text.

The Bank of Russia has increased the authorised capital of its subsidiary RNRC from RUB71bn ($934m) to RUB300bn since Russia’s incursion into Ukraine. Various other sources, including those citing Russian government officials, confirm that RNRC has reinsured oil cargoes flying the Russian flag that have been denied insurance by western businesses.

“Therefore, the Russian National Reinsurance Company is an entity supporting materially and financially, and benefitting from the government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilisation of Ukraine. Moreover, the Russian National Reinsurance Company is an entity involved in economic sectors providing a substantial source of revenue to the government of the Russian Federation, which is responsible for the annexation of Crimea and the destabilisation of Ukraine,” according to the EU text.

The final significant maritime inclusion in the final text was Atomflot, the Russian company that maintains Russia’s icebreaker fleet, which in turn supports Russia’s maritime transportation objectives along the Northern Sea Route — the Arctic shortcut between Europe and Asia.

The Northern Sea Route has emerged as a high-profile strategic opportunity for unlocking and monetising Russia’s vast oil and gas reserves in the Arctic, thereby providing a substantial source of revenue to the government of the Russian Federation.

Mr Putin even included a specific mention of his intentions to accelerate Norther Sea Route infrastructure in his address to the Russian Federal Assembly last week.

“Our plans include the accelerated modernisation of the eastward railways, the Transsib and the BAM, and building up the capacity of the Northern Sea Route. This means not only additional cargo traffic, but also a basis for addressing national tasks on the development of Siberia, the Arctic and the Far East,” said the Russian President.

The late inclusion of Atomflot is therefore thought to be a targeted measure against expansion.

With oil and gas exports shifting from Europe to Asia as a result of Russia’s military action against Ukraine and subsequent western sanctions, Russia’s icebreaker fleet is key to the country’s Arctic hydrocarbon strategy.

In order to escort oil and gas tankers on the much longer and more challenging voyage from the Yamal and Gydan peninsulas to Asia, rather than the much shorter and less icebound route to Europe, Russia relies on Atomflot’s fleet of nuclear icebreakers.