Russia - Ukraine crisis: impact of global sanctions on shipping


Since this article was written, the war in the Ukraine is sadly continuing. Countries around the world have strengthened their sanctions against the Russian state and those deemed to be Russian oligarchs. Whilst the sanctions against the state and individuals are no doubt effective, they have not, yet at least, had the desired effect of stopping the war. As the worldwide sanctions continue to widen, those involved in international trade and insurers will need to continue to keep a keen eye on how particular sanctions might affect a particular trade. 

In the UK, the Economic Crime (Enforcement and Transparency) Bill, which was fast tracked as a result of the war, has now become law. Amongst other things, this provides for:

  • A new strict civil liability test for imposing monetary penalties.
  • Changes to the review of monetary penalties.
  • The new OFSI ability to publish details of breaches where a monetary penalty has not been imposed.

As Russia’s invasion of Ukraine progresses, global leaders have responded by imposing increasingly severe sanctions against Russia, Russian companies and Russian individuals. Our previous article looked at the steps insurers can take to mitigate their risks exposure. Here we consider the impact of the current sanctions from various jurisdictions around the world, with a focus on those areas which might impact the global shipping and trade industry.

Global impacts

Regardless of the differences in the level and extent of sanctions implemented by global governments, the impact to trade and shipping has many common features.

These include:

  • Exports out of the Black Sea region will be impacted due to blockages to shipping routes and the high cost or lack of availability of insurance for vessels.
  • Curtailment of ship movements in the Black Sea area (the world’s second-largest grain-exporting region in 2021) means the price of wheat is expected to rise significantly.
  • Oil prices have already increased to a 13 year high, adding further costs on top of the current sky-high container freight rates.
  • The threat of Russian retaliation with cyber-attacks targeting global container supply chains. Given the zero buffer capacity in container shipping, a cyber-attack could have a devastating effect. Many ports and terminals have boosted their cyber defences over the last years, but they are not impermeable, and a good backup plan has to be carefully considered.
  • Charterparty disputes around safe ports, war risks and sanctions clauses.
  • The UK, the US and the EU have all agreed to exclude a number of Russian banks from using the international payment system SWIFT, a secure messaging network that allows banks to make fast cross-border payments. SWIFT is used by approximately 11,000 banking and financial institutions across more than 200 countries and the potential disruption to Russia is likely to be substantial. However, the move may also directly impact the shipping industry with delayed payments slowing trade.
  • In the latest step - potentially the most damaging of all to Russia - the US, the UK and the EU have decided, to varying degrees, to target Russia’s energy sector more directly. This action is likely to have the biggest impact on the shipping industry and its insurers as it will result in a change in commercial operations ranging from costs, routes and the contractual parties along the entire supply chain.


  • Australia imposed autonomous sanctions (as part of its independent foreign policy) in response to the Russian threat to the sovereignty and territorial integrity of Ukraine in 2014, which extended in 2015 and now, in 2022.
  • The Russian autonomous sanctions restrict the export, supply, import, purchase or transport of certain goods, provision of certain services, commercial activities, and providing or dealing with the assets of designated person or entities.
  • Australia imposed other autonomous sanctions in relation to Crimea and Sevastopol, which will be extended to the Donetsk and Luhansk regions of Ukraine from 28 March 2022. The regulations also include a power to extend these sanctions to other areas of Ukraine, should they fall under Russian influence. These sanctions are targeted at transport, telecommunications and energy sectors, and the exploitation of oil, gas, or mineral reserves in these regions.
  • On 23 February 2022, Prime Minister Scott Morrison introduced a raft of new sanctions, travel bans and asset freezes on Russia, aimed at imposing a severe cost on the Russian economy by disconnecting its key banks from the international financial system and disrupting Russian trade and investment flows.
  • Sanctions have been imposed on Russian banks, institutions and individuals, and Belarusian individuals and entities who are said to have aided and abetted Russian by allowing it to launch attacks from Belarus.

On 28 February 2022, the Morrison Government indicated it “…will continue to coordinate closely with [its] partners – including the United States, United Kingdom, Canada, NATO and the EU - to impose a high cost on Russia” and that it will provide lethal as well as non-lethal military equipment, medical supplies, and financial assistance to support the people of Ukraine.


Australia’s trade with Russia is relatively minor compared to many other countries who are currently imposing sanctions. Russia is Australia’s 48th largest trading partner. Major exports are comprised of alumina, live animals, starches, inulin and wheat; and major imports are fertilisers, crude petroleum and wood manufacturing products. 

Global trade disruptions have already seen hikes in crude oil prices due to Russia being the world’s second largest exporter of oil and refined petrol, as well the world’s largest exporter of natural gas. This may result in indirect trade consequences for Australia.

Australia is a major exporter of liquefied natural gas. With global trade disruptions, this may constrain Australia’s exports in the near term.

The Australian marine insurance market should closely monitor Ukrainian and Russian waters, especially around the Black Sea and Sea of Azov as they pose high risk whilst tensions persist in the region. Underwriters will need to react and adjust their risk appetite to reflect the current changing circumstances.

The Department of Foreign Affairs and Trade (DFAT) maintains a Consolidated List of all persons and entities designated for the purposes of Australia’s sanctions regimes. Australians with interests in the Donetsk and Luhansk region of the Ukraine have until 28 March 2022 to consider whether their activities are captured by the sanction’s measures; and if they are, either to cease their activities, or to apply to the Minister for Foreign Affairs for a sanction permit to continue their activities. 

Australian shipping companies and marine insurers should, as an initial step, review DFAT’s Consolidate List  to identify if a person or entity listed is a current or proposed contractual counterpart, trading partner or in any way involved in the transaction.

Marine insurance interests in Australia may now suffer exposure if trading partners, exporters/importers, freight forwarders or financial providers are captured by the new limits now imposed on Russia.


  • A ban on transactions with the Russian Central Bank.
  • A SWIFT ban for seven Russian banks.
  • A ban on overflight of EU airspace and access to EU airports by Russian carriers.
  • The suspension of broadcasting in the EU of state-owned media Russia Today and Sputnik.
  • Individual and economic sanctions against Belarus.

The wide ranging and fast moving package of sanctions approved by the EU aims to target:

  • Banks that are financing Russian military.
  • The ability of the Russian Government to access the capital and financial markets and services.
  • Trade from the two self-proclaimed Donetsk and Luhansk ”independent republics” to and from the EU.


For the European shipping industry, the biggest concern will be the risk of potential future sanctions on the energy sector. Currently, the EU has imposed several packages of sanctions on Russia, including a ban on the export of specific refining technologies to Russia from Europe. This makes it harder and more expensive for Russia to modernise its oil refineries as these technologies are built in Europe, and cannot be easily sourced from other suppliers.

If further sanctions from the EU do directly target Russia's oil and gas exports, this would have a significant economic impact on Europe – including its shipping industry. Further sanctions would be likely to push up already high gas prices, since Europe imports 90% of its gas, some 40% of it from Russia. It would also impact European entitles involved in transporting oil that has been extracted in the Russian Federation, as they would be viewed as being involved in a sanctionable activity. 

Whilst there are no direct sanctions currently in place, the EU has announced plans to reduce Russian gas imports by 66% this year. As with the UK announcement, an on-going review will be needed to see how this will be implemented and affect the shipping industry.

Conflict-induced trade disruptions will force replacement imports to travel longer distances, thus requiring more ship supply and causing more delays.


  • In an extremely rare move, Singapore’s Minster for Foreign Affairs Mr Vivian Balakrishnan, announced in parliament on 28 February 2022 that Singapore will be imposing sanctions against Russia unilaterally and in the absence of any binding UN Security Council decision or direction.
  • On 5 March 2022, Singapore announced that it will be rejecting all permit applications for the transfer (export, transit or transhipment) of specified items to Russia that can be directly used as weapons to inflict harm on/to subjugate the Ukrainians or that can contribute to offensive cyber operations.
  • Singapore further announced that it will impose financial measures targeted at designated Russian banks, entities and activities in Russia and fund-raising activities benefiting the Russian Government. Digital payment token service providers will be specifically prohibited from facilitating transactions that could aid the circumvention of the financial measures. These measures apply to all financial institutions in Singapore including banks, finance companies, insurers, capital markets intermediaries, securities exchanges and payment service providers.
  • Singapore is the only ASEAN (the Association of Southeast Asian Nations) country so far to have announced sanctions against Russia. While ASEAN has so far issued a joint statement calling for, “an immediate ceasefire or armistice and continuation of political dialogue that would lead to sustainable peace in the Ukraine”, it is not clear if other member states will be imposing any sanctions.
  • Singapore very rarely imposes sanctions against other countries in the absence of a binding UN Security Council decision or direction. It is believed that the last time Singapore had acted on its own in imposing sanctions against another country was over four decades ago, after the Vietnamese invasion of Cambodia in 1978.
  • However, given the unprecedented gravity of the Russian attack on Ukraine and the unsurprising veto by Russia of the draft Security Council resolution in relation to the attack on Ukraine, Singapore has felt it necessary to take action.


Given Singapore’s position as a major independent financial hub, Singapore’s sanctions on Russian banks and Russian related financial transactions could limit Russia’s ability to circumvent sanctions already being imposed by the US, EU and other countries by otherwise rerouting transactions through Singapore. This is especially so as the Singapore sanctions specifically cover cryptocurrencies.  

While Singapore does not engage in a significant amount of direct trade with Russia, the imposition of export controls could still have a significant impact, as Singapore’s sanctions also cover specified goods transhipped/transiting in Singapore and the financing of export of specified goods to Russia by Singapore financial institutions, even where the goods do not pass through Singapore.

The Monetary Authority of Singapore (which regulates financial institutions including banks and insurers) will be issuing more detailed directions to financial institutions on the implementation of Singapore’s sanctions. In the meantime, it has sent a circular to all financial institutions in Singapore to remind them to manage the risks associated with the situation in Ukraine and the sanctions imposed in major jurisdictions. Financial institutions have been reminded to stay vigilant to any suspicious transactions or flow of funds and to apply enhanced customer due diligence in higher-risk situations.

While there is no blanket prohibition against all Russian related business and the sanctions remain targeted at specified entities and sectors, it is anticipated that financial institutions in Singapore will take a cautious approach. Even before Singapore had announced any sanctions, Singapore’s biggest banks had already restricted trade financing for Russian commodities. It is understood that Singapore banks DBS, OCBC and UOB have already stopped issuing letters of credit involving Russian energy deals because of war in Ukraine and uncertainties over sanctions.  


  • Russian ships banned from all UK ports. This includes Russian flagged, registered, owned, controlled, chartered or operated vessels.
  • UK individuals and entities are restricted from undertaking financial transactions with the Russian Central Bank.
  • Sanctions on hundreds of individuals, including asset freezes and travel bans.
  • Sanctions on a number of key Russian companies including defence companies and manufacturers, and Russia’s largest shipbuilding company, United Shipbuilding Corporation, preventing dealings with them.
  • Asset freezes against all Russian financial institutions.
  • Russian companies prevented from issuing transferable securities and money market instructions in the UK.
  • Certain banks prevented from accessing sterling currency and clearing payments through the UK.
  • Ban on all Russian commercial and private jets from UK airspace.
  • Ban on UK-based companies exporting to a wide range of Russian defence, naval, transport and communication companies.
  • Ban on export, supply, delivery and making available of dual-use goods and critical-industry goods.


The ban of Russian ships entering UK ports means that the UK is unlikely to be involved in the seizing of vessels, as seen in Europe and the US. However, this total ban does mean that cargoes of oil, metals and gas – the UK’s top imports from Russia - are likely to be affected – but only by carriage on Russian vessels.

The UK Government has confirmed that non-Russian registered vessels can transport Russian oil and gas to the UK. However, in its latest move, the UK has said that it will “phase out imports of Russian oil… by the end of the year”. It is not clear yet precisely how this will take place although sanctions may well be necessary to enforce this. A watchful eye on this development will be needed to see how those in the shipping sector might be impacted over the next nine months.

While the rise in oil prices will impact the global shipping economy, the UK largely relies on gas from the North Sea and Norway, with only about 5% coming from Russia. Therefore, although the UK should not experience a shortage of gas, the impact on global markets will still be reflected in cost rises. 

The government has long-faced calls to introduce a bill to deal with economic crime. Russia’s invasion of Ukraine has led to the fast-tracking of an Economic Crime (Enforcement and Transparency) Bill which aims to “tackle the scourge of economic crime in the UK and will safeguard our reputation as a clean and safe place for legitimate investment” by introducing a raft of measures to make the movement of cash and assets more transparent. It will also allow the UK to act quicker in sanctioning Russian businesses and wealthy individuals by giving the government power to immediately sanction individuals or companies sanctioned by allies (including the US and EU).


  • The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) prohibited United States persons/entities from engaging in any transactions with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.
  • OFAC has levied sanctions against Russia’s two largest financial institutions, Public Joint Stock Company Sberbank of Russia (Sberbank) and VTB Bank Public Joint Stock Company (VTB Bank), drastically altering their ability to operate.
  • By 26 March 2022, OFAC is requiring all US financial institutions to close any Sberbank correspondent or payable-through accounts and to reject any future transactions involving Sberbank or its foreign financial institution subsidiaries.
  • OFAC has also imposed full blocking sanctions on VTB Bank, Russia’s second-largest financial institution.
  • The US Government is also sanctioning various Russian elites and their family members, and imposing prohibitions related to the debt and equity of major Russian state-owned enterprises and large privately-owned financial institutions.
  • The Department of Commerce Bureau of Industry and Security (BIS) issued a new rule on requiring a license, with a general policy of denial of such license requests, for the export, re-export or transfer of products, software and technology.
  • The US is adding companies designated as 'military end users' (due to their alleged ties to the Russian military) to the SDN entity list.


The Department of Commerce’s Bureau of Industry and Security (BIS) has taken significant measures to curtail Russia’s ability to export or re-export several goods, requiring licenses for such transactions but with a general ‘Policy of Denial’ of such license requests.

This BIS Rule is designed to drastically limit Russia’s access to both low-tech and high-tech goods from overseas. Under the BIS Rule, US suppliers that want to ship to Russia will have to obtain licenses for goods that didn't require one in the past.

Those goods include microelectronics, telecommunications items, sensors, navigation equipment, avionics, marine equipment and aircraft components. The new BIS Rules state that license requests will be reviewed "under a policy of denial," which means the Commerce Department will deny almost all of them. The administration will only approve licenses in rare exceptions, such as applications related to aviation and maritime safety, as well as for humanitarian needs. Smartphone exports to Russia are also allowed, so long as they are not shipped to Russian Government employees or state-owned enterprises.

Any company seeking to ship products made abroad to those companies designated as military end users will also have to obtain licenses from the United States if they're using US-made tools, technology and/or software for their products. The government says these sanctions should "significantly impact Russia's ability to acquire items it cannot produce itself."

The US continues to roll out new or modified sanctions on almost a daily basis, and the severity of these sanctions, as well as additional new onerous sanctions, are expected to increase as Russia’s occupation of Ukraine progresses.

This has been demonstrated by the US now leading the way in financially attacking Russia’s energy sector. On 8 March 2022 an Executive Order was announced which bans:

  • The importation of Russian crude and certain petroleum products, liquified natural gas and coal into the US.
  • New US investment into Russia’s energy sector.
  • Americans from financing or enabling foreign companies that are making investment to produce energy in Russia.

These sanctions have a direct impact on both the US and the global economy, and the shipping industry in particular. Shipping companies should be wary of engaging in any transactions with any Russian affiliated company, or engaging in any transactions with any financial institution affiliated with Russia.

US shipping companies or their affiliates should anticipate any business with Russian entities to be increasingly limited. It is expected that even if a transaction with a Russian entity is not directly subject to US sanctions, major financial and insurance institutions may decide not to support it due to the risk of secondary sanctions levied by OFAC. This will have a significant chilling effect on the shipping industry as a whole, further exacerbating disruption in the global economy trying to recover from the COVID-19 pandemic.


Applying pressure through sanctions in order to destabilise and disrupt a country financially is deemed to be the strongest action that can be taken in the absence of military intervention and there is evidence that the measures are effective.

What is not yet known is what sort of response, other than in the military context, might come from Russia.  Many countries have urged caution over a potential increase in cyber-attacks, and these could affect global container supply chains. Russia’s Foreign Ministry vaguely stated that “there should be no doubt that a strong response will be given to the sanctions” and threatened measured retaliatory steps targeting sensitive US interests. Medvedev suggested that there might be the nationalisation of Russian based assets belonging to foreigners and companies from “hostile jurisdictions”. 

From a commercial context, the responsibility for imposing the sanctions on Russia is not only on the states imposing them. Any entities involved in any business or trade which might be caught by these sanctions inadvertently also take on the role of enforcing these sanctions by ensuring that the related business or trade undertaken with Russia or Russian entities ceases, lest they find themselves in violation of these sanctions and subject to fines or even penal penalties themselves.

The number of sanctioned Russian entities and individuals (including on the US SDN and EU Consolidated List) is growing at an extremely fast pace and it is vital that insurers and their insureds exercise constant vigilance as to who they transact with and what sanctions might affect their business to avoid their own penalties. In addition, companies need to be prepared for the inevitable negative effect on trade which is going to disrupt their business; increased oil prices, inability to trade with certain parties or call at certain ports, delayed or cancelled payments are to but name a few immediate impacts to the shipping and trade industry.

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