Ex-Treasury, Assistant Secretary for Investment Security (CFIUS), led sanctions enforcement (OFAC) | Founder @ The Rubicon Advisors | National security compliance
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Interesting WSJ piece on a Turkish textile magnate whose “factory makes socks and underwear for Western brands such as H&M,” and his “side venture” (40 vessels worth nearly $1 billion) financed by unnamed “banks in France, China, Japan, Taiwan, and Australia.” This “ghost fleet” and others are “helping Russia adapt to the West’s sanctions”. It “includes hundreds of vessels worldwide, many owned by companies in Greece, India, and the UAE, as well as Turkey. Many evade Western sanctions by operating outside the usual industry standards …” The WSJ says “the effectiveness of the U.S.-led sanctions effort is fading,” with “Russia’s leading Urals-grade crude” last month trading “above the cap the Group of Seven economies set for Russian oil in December” in their bid to stifle Russia’s oil revenue. The WSJ notes: “analysts say this suggests that *a large portion of its exports are being shipped and sold on at higher prices.*” (emphasis added) While the U.S. is concerned that Turkey’s a key player in Russian sanctions evasion, U.S. Treasury maintains that “the price cap is working,” and that Russia’s oil revenue is half of last year’s. Regarding the Turkish socks-and-underwear guy’s fleet, apparently it mostly transports oil from Russia “to China, India and other buyers.” The WSJ concludes that “the net result … Russia has *expanded its share in some of the world’s largest oil markets during the war, changing the way the global energy supply works.* It briefly overtook Saudi Arabia as China’s largest supplier in April. Now the two are roughly even, with analysts expecting Russia to pull ahead again in the coming months.” (emphasis added) On June 15th, speaking to the Center for a New American Security, Treasury’s Deputy Secretary hailed the success of the oil price cap and the significant diminishment of Russian revenue from oil exports (https://lnkd.in/eqZnapcP). He further said that “while we do not see widespread signs of evasion, we know Russia is seeking ways to evade the price cap … We are laser-focused on preventing evasion in collaboration with our coalition partners and the private sector. For example, in response to suspected evasion, insurers and flagging registries have stopped serving shipping companies whose activities present an unacceptable risk.” As the war drags on and economic sanctions continue, the U.S. will need to continuously assess and reassess its policies’ effectiveness: the extent the cap is changing how the market behaves; the precise mechanisms of evasion, and the extent that shipping co’s and middlemen are “operating outside the usual industry standards”; the actual quantity of oil selling above the cap; and, what the U.S. can do to counteract the evasion. Even with diminished oil $$, is it enough for Russia to sustain its economy and war effort? … If after just seven months Russian oil is finding a way to sell over the cap, what’s the next policy move for the U.S. and its allies?