16. Jun '24Sanctions

Løkke talks about sanctions: Danish initiative must stop the dark fleet

For the first time, the Foreign Minister opens up about the ongoing negotiations to stop Russia’s sanction-violating oil exports through Denmark.

Imago Ritzau Scanpix Scaled
Until now, it has been completely confidential how the work on new sanctions against Russia's oil exports will be implemented. Now, Lars Løkke Rasmussen says that it is a Danish initiative.Imago / Ritzau Scanpix

Russia’s oil exports in the Baltic Sea have come under increased scrutiny from Denmark and neighboring countries.

This has happened as the Russian dark fleet has grown and more than every second tanker, carrying Russian oil, has become part of the sanctioned, merchant fleet.

However, now it must end, Foreign Minister Lars Løkke Rasmussen (M) tells Danwatch and Information.

Denmark has gathered a coalition of allied countries, which together are on the point of implementing concrete measures against the dark fleet.

“(…) Denmark has brought together a group of countries to look at the possibilities for further measures against the dark fleet. It is pivotal that all new measures can be implemented in practice and are legally sustainable,” says Løkke.

Furthermore, he says that it’s not possible to go into detail about the new measures because it’s confidential.

“As I have said from the start, Denmark takes the challenges of the dark fleet very seriously and we are in continuous, confidential dialogue about the dark fleet with our partners, including other coastal-Baltic states and in the EU. There is a broad consensus that the dark fleet is an international problem, and that international solutions are required,” he says.

The possibility of introducing a blockade of dark-fleet vessels has been discussed several times, and the EU has previously pushed for Denmark to stop these vessels.

However, this exact solution is not legally sustainable, as Denmark is liable to allow all ships to sail through Danish straits between the North Sea and the Baltic Sea.

Professor of Maritime Law at the University of Southern Denmark, Kristina Siig, says that you need a very good reason to stop ships sailing through Denmark. In this case, poor maintenance, invalid insurance or having the cargo filled with sanctioned oil is insufficient.

“As long as the individual ships aren’t dangerous, there’s not much we can do. It’s a question of enforcement; can we just go out and check ships in transit? No, we can’t because we’re not allowed to inspect them when they’re sailing without good reason,” she says.

Therefore, this is a completely new solution, which Denmark is trying to put together with allies.

A solution that could be an alternative to a blockade, while ensuring that dark-fleet vessels stop carrying sanctioned oil and putting coastal states in the Baltic Sea at imminent risk of a catastrophic oil spill.

The Baltic Sea as a “dark-free zone”

The Ministry of Foreign Affairs has not wanted to specify which countries are part of the alliance.

However, Danwatch and Information have learned that a number of proposals have been discussed in several European countries on how to stop the dark fleet.

One of the suggestions comes from The International Working Group on Russia Sanctions. The independent expert group advises policymakers across the West on how to increase the sanctions against Russia as much as possible whilst remaining at the right side of the law.

They support a proposal that all tankers in the Baltic Sea are asked to prove that they have sufficient insurance coverage.

In other words: verify that you have an insurance policy, and that there is money behind the policy to cover an oil spill, which complies with international legal requirements and industry standards.

According to the American expert on Russia and sanctions, Craig Kennedy from the working group, this model could turn the Baltic Sea into a “dark-free zone”.

“In short, the proposal is about discouraging ships, either without insurance or with invalid insurance, from sailing in the Baltic Sea,” he says.

If the personnel on a ship does not wish to submit documentation, nothing happens at first, Craig Kennedy explains.

“However, those who fail to comply with the request for transparency and documentation are consequently sanctioned by the G7 and EU countries’ responsible authorities, provided they return to the Baltic Sea and refuse again,” he says.

All of this must be done without either prohibiting passage through Danish straits or physically inspecting ships in the Baltic Sea. Therefore, according to Kristina Siig, it may very well be legally possible.

“It’s an insurance they are actually obliged to have. Thus, I do believe that we are legally liable to ask for it, even though if there is no practice for it before,” she says.

She points out that a similar model from Bosphorus in Turkey, which is the only route from the Black Sea to the Mediterranean, has proven to be successful.

“Turkey had a similar, voluntary scheme, which actually went a bit further where, as far as I understand, they asked for proof that they carried insurance on oil pollution and that it would cover, regardless of whether the oil was sanctioned, including prior to going through the Bosphorus Strait,” it says.

According to Kristina Siig, this model succeeded in reducing the number of dark-fleet vessels in the Turkish straits with fraudulent insurance policies.

No oil without dollars

As the dark fleet generally has questionable insurance, for instance the Russian insurance company, Ingosstrakh, which does not offer any transparency in their insurance agreements, it will be extremely difficult for the ships and their insurance companies to provide adequate answers in practice, says Craig Kennedy.

“Experience shows that vessels from Russia’s dark fleet stop being used to the same extent when they are sanctioned. Therefore, we expect that the mere threat of sanctions will deter them from being used further in the Baltic Sea.”

One of the examples, which Craig Kennedy and other experts in snctions use when talking about the impact of sanctions, is the shipping company, Hennesea Tankers, which operated a fleet of 18 tankers.

They were all singled out by the US sanctions agency, OFAC, for trading in overpriced oil from Russia. Since then, it has been virtually impossible for Hennesea to transport Russian oil.

This is because they become difficult to do business with, as you risk being banned from trading in dollars, provided you continue trading with a sanctioned company.

In the oil industry, there is no way around the dollar, says Kennedy.

“Because of the US dollar’s absolutely pivotal role in the global oil market, a ‘blocking order’ on the tankers would effectively make it impossible for them to continue trading in oil,” he says.

According to his analysis, to avoid the dark fleet being ostracised from the global market, vessels will stop shipping oil through the Baltic Sea and Great Belt.

However, there is a catch, says Kristina Siig, because Denmark has a special role as a transit country between the North Sea and the Baltic Sea. As a consequence, we are committed to allowing parts of our strait to be regarded as international waters.

Therefore, everyone is liable to pass through undisturbed as long as they don’t stop. Consequently, the new proposal concerning the dark fleet must be drawn up with a focus on the marine environment.

“The Law of the Sea does not allow us to enforce our sanctions in international waters; however, it does allow us to take reasonable care of our environment. I believe that asking people to show their mandatory insurance certificate is a reasonable consideration,” she says.

Danwatch and Information have asked the Foreign Minister whether or not a similar model is being considered in the coalition, which Denmark assembled.

He has not wished to comment on this.