As the European Union is considering ways to toughen up the sanction enforcement on Russia's oil exports, Denmark could be asked to stop and check paperwork for oil tankers carrying Russian crude through the Danish straits.
The EU is currently mulling over ways to enforce stricter checks on the shipments of Russian crude oil, almost all of which is now trading above the $60 per barrel price cap set by the G7 and the EU at the end of last year.
Under the price cap mechanism, Russian crude oil shipments to third countries are allowed to use Western insurance and financing only if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.
"Almost None" Of Russia's Oil Is Sold Below The Price Cap
In recent weeks, U.S. and EU officials have grown increasingly concerned that Russia is selling nearly all of its crude above the price cap.
"Almost none" of Russia's crude shipments in October were executed below the $60 a barrel cap, a senior EU government official told the Financial Times earlier this week.
"The latest data makes the case that we're going to have to toughen up," the official said.â
"There's absolutely no appetite for letting Russia just keep doing this."
The U.S. is also reportedly working to further clamp down on price cap evasion.
The U.S. Department of the Treasury has requested information from ship management companies about 100 tankers suspected of violating the sanctions on Russian oil, Reuters reported earlier this week, citing a source who has seen the notices the Treasury has sent. The tankers under scrutiny have loaded Russian crude from the Far Eastern port of Kozmino and from the port of Primorsk on the Baltic Sea, according to the source.
Russia, for its part, claims that it would continue to adapt to the oil sanctions.
Russia is adapting to the increasingly stricter U.S. sanctions on trade with Russian oil and is acting in accordance with its own interests, Kremlin spokesman Dmitry Peskov said this week, commenting on reports that the United States was looking into punishing more vessels breaching the G7 price cap on Russia's crude.
"Sure, we understand that the American authorities continue to press for more sanctions in one form or another," the Kremlin spokesman said.
"But we adapt to these conditions and act in a way that best suits our interests."
Denmark To Inspect Russian Oil Cargoes?
As part of tougher sanction enforcement on evaders of the price cap, Denmark could be tasked with inspecting cargoes carrying Russian oil and passing through the Danish Straits, three sources with knowledge of the talks in Brussels told the Financial Times this week.
Russia's oil exports from its western ports on the Baltic Sea account for around 60% of all its oil shipments and all of those have to cross the Danish straits en route to the Atlantic.
Denmark could be asked to inspect oil tankers lacking Western insurance in the straits, under regulations allowing inspections on tankers that could pose oil spill and environmental threats, according to FT's sources.
Denmark only checks paperwork or inspects tankers in the straits if they pose a threat to safety at sea, a spokesman for the Danish defense command told FT.
The "safety at sea" grounds for checks could be easily applied in Russia's case because Moscow has significantly increased its reliance on the so-called 'shadow fleet' of old decrepit tankers without Western insurance to ship its oil to markets outside Europe.
However, maritime law experts have told Reuters that stopping commercial vessels in the straits would violate the rules of the sea and maritime traffic.
"Denmark has never done anything like that before. Blocking commercial traffic in the Danish straits would come close to a declaration of war," independent defense analyst Hans Peter Michaelsen told Reuters.
Moreover, EU diplomats told the news agency that the European Commission's proposal for the next sanctions package doesn't include targeting Russian oil tankers.
The 12th sanctions package is expected to be discussed by EU member states on Friday and includes stricter enforcement of the price cap on Russian oil and banning imports of diamonds and liquid petroleum gas from Russia, EU diplomats told Reuters on Wednesday.
An agreement on the latest sanctions package requires unanimous approval from all 27 EU member states and is still weeks away.
Regardless of whether Denmark would be asked to check and potentially block oil tankers carrying Russian oil from the Baltic ports to international markets, the West seems determined not to let Russia continue circumventing the price cap.
"Discussions appear to be centered on making life more complicated for Russia and the buyers of its oil," Henning Gloystein at Eurasia Group told FT.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More