European shipping firms ‘making a mockery’ of Russia sanctions as oil cargos double

European companies have almost doubled their shipments of Russian oil since the start of Vladimir Putin’s invasion of Ukraine, despite desperate efforts by EU leaders to squeeze the Kremlin war machine by blocking it from global markets.

Campaigners said EU-based shipping firms had made “a mockery” of plans to sanction Russia and warned that a partial oil embargo announced this week would do little to hurt Putin or shorten the war.

The damning assessment came as exclusive new analysis showed the extent to which shipping firms based in Greece, Cyprus and Malta had ramped up their transport of Russian oil around the world in recent weeks, taking advantage of big jumps in rates for tanker cargoes.

The shipments have swelled Putin’s coffers by billions of dollars of oil revenue, providing vital funds for Russia’s brutal war, the figures show.

While EU leaders finally reached a deal this week for a watered-down embargo on Russian oil, European tankers laden with Russian crude plied an increasingly lucrative trade.

Analysis of Refinitiv shipping data by anti-corruption group Global Witness shows that Europe’s three major shipping nations – Greece, Cyprus and Malta – rapidly increased the amount of Russian oil they transported in every month since the war began.

In February, when Putin’s troops invaded Ukraine, firms and vessels linked to the three nations shifted 31 million barrels of Russian oil. In May, that figure had jumped to 58 million barrels. In total, ships linked to Greece, Malta and Cyprus have transported 178 million barrels, worth $17.3bn at current prices for Russian crude, since February.

At the start of the war, ships linked to the countries carried a little over a third of oil exports from Russian ports. By May, that figure had jumped to just over half.

Anastassiia Fedyk, a finance professor at the Haas School of Business at UC Berkeley, said the findings were “very concerning”.

“The EU has leverage over Russia due to inelastic energy supply: it is difficult and costly for Russia to divert its energy elsewhere. Allowing EU-flagged ships to carry Russian oil thus only undermines the EU’s own bargaining power.”

“An oil embargo needs to be an oil embargo, and this is not an oil embargo,” said Ms Fedyk, who is a member of the International Working Group on Russian Sanctions, and a co-organiser of the Economists for Ukraine initiative.

“This is a policy that will partially decrease oil deliveries, while promoting some structural changes in the oil logistics industry,” she said.

The European Commission announced plans on Tuesday to finally ban seaborne imports of Russian crude into the trading bloc, but the measures will be phased in over months and have been significantly weakened amid wrangling among EU member states.

Russian oil will continue to flow into Europe via a pipeline through Hungary and – after lobbying from shipping interests in Greece, Malta and Cyprus – EU-registered boats and companies can continue moving oil from Russian ports to non-EU countries.

That means EU companies can continue to profit from facilitating transfers of Russian oil to countries such as India and China, which have proved to be willing buyers for crude that Europe no longer wants.

China is now the leading importer of Russian oil after ramping up its purchases since the war began.

Because many companies have since shunned Russian crude, the minority of firms that are willing to continue shipping it are able to collect bumper fees. A large tanker departing Primorsk could collect $32,500 a day as of Friday, compared to less than $10,000 before the invasion, a shipping industry source said.

Experts and campaigners warned the failure of European leaders to stop EU-controlled ships carrying Russia’s cargo left a gaping hole in the partial embargo.

EU dithering has also punished European consumers because markets have pushed up oil prices for weeks, in the expectation that a tough embargo would be announced, Ms Fedyk said.

“Ordinary citizens in European countries have been paying more for Russian oil without actually punishing Russia – in fact only increasing Russia’s revenues going towards the war, as the Russian ministry of finance has openly bragged.”

The exclusion of maritime sanctions was counterproductive and should be urgently reconsidered, Ms Fedyk added.

While some companies, such as Shell and BP, have sought to publicly distance themselves from Russia’s oil and gas industries, others have stepped in.

Among them are firms owned by some of Greece’s wealthiest shipping oligarchs. There is no suggestion that any of the companies or their owners have violated sanctions or broken the law.

But the figures raise questions about the effectiveness of international efforts to financially squeeze Putin’s regime and bring the bloodshed in Ukraine to an end.

Greece’s former finance minister, Yannis Varoufakis, said that the country’s shipowners had a vested interest in blocking any interruption to the sale of Russian oil.

However, he argued that the industry contributes “next to nothing” to the Greek economy, because its vessels are often registered in other countries and profits are kept offshore, beyond the reach of Greece’s government.

Louis Goddard, senior data investigations adviser at Global Witness, said: “Since the invasion of Ukraine, European oil tankers haven’t just kept up their deadly trade in Russian oil: they’ve increased it.

“Ships linked to Greece, Cyprus and Malta are making a mockery of the EU effort to sanction Putin’s war machine, keeping cash flowing to Russia as the country’s armed forces continue to pummel Ukraine.

“To close this gaping loophole, the EU must stand firm against lobbying from all member states with vested interests in the Russian oil trade and put restrictions on shipping at the heart of its sanctions regime.”

Benjamin L Schmitt, research associate at Harvard University and senior fellow at the Center for European Policy Analysis, said Europe’s inability to completely ban Russian oil meant that “Moscow will continue to feel insufficient pressure to relent in its ongoing atrocities against Ukrainian sovereignty”.

As oil prices have risen sharply, the Kremlin has seen a huge boost to its finances, registering a record current account surplus in April.

The Russian government is on track to receive an unprecedented $250bn inflow of cash this year, said Clay Lowery, vice president of the Institute of International Finance.

“This massive inflow of hard currency means there is abundant liquidity and thus low interest rates, which keep Russia’s finances more stable even as its economy deteriorates.”

He added that a maritime embargo could be key in preventing redirection of oil exports to countries like China and India.