The UK government is currently investigating 37 businesses linked to the UK for potential violations of Russian oil sanctions, as revealed by the BBC. Despite the ongoing inquiries, no fines have been issued thus far.
In response to Russia’s invasion of Ukraine in 2022, the UK, along with other Western nations, imposed financial sanctions on Russia aimed at crippling the funding for its military operations. Conservative shadow foreign office minister Dame Harriett Baldwin emphasized that these sanctions are intended to “shut down the sources of finance for Russia’s war machine” and to “bring this illegal invasion to an end sooner.”
However, critics argue that the sanctions are ineffective, pointing to recent data that suggests the Russian economy is experiencing growth. While the identities of the businesses under investigation remain confidential, sources indicate that some may include maritime insurance firms.
The UK Treasury has stated that it will pursue action where appropriate but highlighted the complexity of the cases as a factor for delays. Among the sanctions in place is a price cap on Russian oil, designed to keep the flow of oil ongoing while preventing Russia from reaping excessive profits. Specifically, British businesses are prohibited from facilitating the transportation of Russian oil sold for more than $60 a barrel.
Recent data obtained through Freedom of Information laws reveals that the Treasury has initiated investigations into 52 UK-connected companies suspected of breaching the oil price cap since December 2022. As of August, 37 investigations remain active, while 15 have concluded, yet no fines have been levied.
Dame Harriett Baldwin noted that there is likely more that could be done by the government and the oil sector, stating, “It does appear that UK importers are still bringing in oil that originated in Russia.”
Global Witness, an anti-corruption organization, expressed astonishment over the lack of penalties, labeling the oil cap as a “paper tiger” failing to effectively deter rule-breaking. Louis Wilson, head of fossil fuel investigations at Global Witness, urged for “bold action” against companies found to be in violation of sanctions, asserting that stronger measures would encourage compliance from others.
Investigations into potential sanctions breaches are managed by the Office of Financial Sanctions Implementation (OFSI), which received an additional £50 million in funding in March to enhance its enforcement capabilities. Despite this, Wilson claimed that companies under investigation can easily obtain documents that allow them to evade penalties. He described these documents as “basically promises, voluntary bits of paper,” suggesting that businesses might either find the necessary paperwork to navigate the process or see the UK government quietly dismiss these cases.
Wilson also noted that the US may hesitate to strengthen Western sanctions for fear that stricter enforcement could disrupt the Russian oil trade and drive global oil prices higher.
Dame Harriett Baldwin stressed the importance of OFSI imposing financial penalties when deliberate wrongdoing is identified. A Treasury spokesperson reiterated that enforcement action would be taken “where appropriate,” indicating that the cap is successfully reducing Russia’s oil tax revenues, with data from Russia’s own finance ministry showing a 30% drop in revenue compared to 2022.
Earlier this year, the former chair of Parliament’s Treasury Select Committee initiated an inquiry into the effectiveness of sanctions on Russia. Baldwin indicated that evidence suggests the oil price cap is being evaded through the refining of Russian oil in third countries before being exported to the UK.
Despite earlier reports from the BBC regarding a loophole allowing Russian oil into the UK, parliamentary committees disband when elections are called, and findings from the Treasury committee inquiry were never published. A decision on whether the new Treasury Select Committee will resume this inquiry has yet to be made.
OFSI recently issued its first Russia-related penalty, fining a concierge company £15,000 for having a sanctioned individual on its client list. Integral Concierge Services was found to have conducted 26 transactions involving a person whose assets were frozen as part of the sanctions against Russia.
