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Faced With Sanctions and Scorn, Some Russian Ships are Flagging Out

Russian
File image courtesy Flowcomm / CC BY 2.0

Published Apr 3, 2022 8:49 PM by The Maritime Executive

Facing increasing regulatory barriers and public-relations challenges, some Russian shipowners appear to be switching away from the Russian flag registry. 

An analysis of AIS data conducted by Windward shows that 18 merchant ships left the Russian flag in March, according to Bloomberg. Some of the activity could reflect AIS spoofing rather than a legitimate change of flag state, but it is a definite change in pattern. 

Russia is accelerating its transition to pariah-state status in the West, its access to markets growing ever more restricted due to its invasion of Ukraine. Though most Russian businesses and private individuals have no direct connection to the Russian military's alleged war crimes, many Western companies no longer wish to seen doing business with Russian entities - not just because of the compliance issues, but because of the reputational risk. The additional hazard of as-yet-unknown, future sanctions on Russia provides another incentive for businesses to "self-sanction" and avoid new contracts, since any agreement could be upended overnight by U.S. Treasury designations.

This has implications for shipping. According to Reuters, multiple bunkering firms are no longer providing fuel to Russian-flagged vessels in several key bunkering hubs in the Mediterranean, including Spain and Malta. Part of the problem is in arranging for payment: most (but not all) Russian banks have been removed from the SWIFT interbank messaging system, and some are under financial sanctions.

The challenge extends beyond the Med. The world's largest bunker provider, Bunker Holding - which was recently convicted of criminal charges related to sanctions-busting - said in a statement that it is no longer entering into new contracts with Russian entities. The firm cited "the terrible situation in Ukraine" and the need to "act swiftly and decisively against Russia." 

In addition, Canada and the UK (including Gibraltar) have banned Russian-linked vessels altogether, and an official in Malta told Reuters that the island nation is not admitting Russian-flagged ships to its ports. 

Top image courtesy Flowcomm / CC BY 2.0