Restrictions on Russian oil products may hit business

The government updated UK Russia sanctions regulations to extend restrictions to certain oil products that are derived from Russian crude oil but processed in other countries. The provision of certain services related to such imports is also prohibited.

In tandem with the new restrictions, the UK’s Office of Trade Sanctions Implementation issued a new general licence that provides carve-outs from the new restrictions - the licence is designed to enable the import into the UK of diesel and jet fuel that is derived from Russian crude oil but processed in other countries.

The issuing of the licence has been widely reported as an easing of existing restrictions on Russian oil, but the opposite is true. The licence is a carve-out to new restrictions imposed by UK government and a reflection of the pressures on UK supplies of jet fuel and diesel, which are forecast to intensify over the summer.

The licence for sanctioned processed oil products has limitations. First, it does not provide blanket clearance to import Russian linked oil and oil products into the UK. Rather, it is designed to enable two specific oil products - jet fuel and diesel - that have been processed in third countries but refined from Russian oil and oil products, to be imported.

Movements to the UK of oil and oil products which are consigned from, or originate from, Russia have been prohibited since 2022. The new restrictions extend the import prohibition to oil and oil products processed outside of Russia from Russian origin products.

Government guidance on the new measures noted that third country processing may allow Russian oil to enter the UK via the ‘back door’ and said that its measures are “targeted at addressing that and further reducing Kremlin revenues”.

There remains other sanctions regimes to consider from a compliance perspective. For example, we are aware of at least one Indian refinery - Nayara Energy - that processes Russian crude oil which is designated under the UK’s financial sanctions regime.

The new general licence does not provide a safe harbour for UK importers to source jet fuel or diesel from it, and with the global nature of oil and oil product supply chains, there are also EU and US sanctions regimes to consider.

Oil and gas markets globally have been impacted by the Middle East conflict which has not only affected oil and gas production and refineries in the region but the de facto closure of the Strait of Hormuz has placed major constraints on the distribution of available supplies globally.

The government carve-out from the new sanctions on third country processed Russian oil for jet fuel is a recognition of the constraint on supply of ‘Jet A’ fuel type arising from the conflict in the Middle East and appears to be an attempt to mitigate the harm to the UK’s economy that could result from further constraints on supply.

Stacy Keen, Partner and specialist in financial crime and compliance, Pinsent Masons