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Treasury targets Russian shipping companies

Jaclyn Jaeger | August 21, 2018

The U.S. Department of the Treasury’s Office of Foreign Assets Control today announced that it has targeted Russian shipping firms for violating North Korea-related United Nations Security Council Resolutions.

OFAC said on Aug. 21 it took the action against two entities and six vessels pursuant to Executive Order 13810. The sanctions target persons involved in the ship-to-ship transfer of refined petroleum products with North Korea-flagged vessels, an activity expressly prohibited by the UN Security Council (UNSC).

“Ship-to-ship transfers with North Korea-flagged vessels from Russia or elsewhere of any goods being supplied, sold, or transferred to or from the DPRK are prohibited under the UN Security Council resolutions on North Korea and are sanctionable under U.S. law,” Treasury Secretary Steven Mnuchin said in a statement. “Consequences for violating these sanctions will remain in place until we have achieved the final, fully verified denuclearization of North Korea.”

Today, OFAC designated Vladivostok, Russia-based shipping companies Primorye Maritime Logistics (Primorye) and Gudzon Shipping (Gudzon), the registered ship owners and managers of Russia-flagged merchant vessel Patriot (IMO 9003550).  In early 2018, the Patriot conducted two ship-to-ship transfers of oil for the benefit of North Korea, including 1,500 tons of oil to the North Korea-flagged merchant vessel CHONG RIM 2 (IMO 8916293) and 2,000 tons of oil to the North Korea-flagged merchant vessel CHON MA SAN (IMO 8660313). The ultimate buyer was UN- and U.S.-designated Taesong Bank, a North Korean entity subordinate to the UN- and U.S.-designated Workers’ Party of Korea Office 39, which engages in illicit economic activities for North Korean leadership.  

The CHONG RIM 2 was listed by the UN and the United States in March 2016. The CHON MA SAN was blocked by the United States in February 2018, and subsequently it was listed by the UN in March 2018 for its involvement in a UN-prohibited ship-to-ship transfer in mid-November 2017.

The following vessels have also been identified by OFAC as property in which Gudzon has an interest:

  • Russia-flagged vessel NEPTUN (IMO 8404991)
  • Russia-flagged vessel BELLA (IMO 8808264)
  • Russia-flagged vessel BOGATYR (IMO 9085730)
  • Russia-flagged vessel PARTIZAN (IMO 9113020)
  • Russia-flagged vessel SEVASTOPOL (IMO 9235127)

“It is important for shipping companies and other relevant parties in the maritime context in particular to conduct reasonable due diligence to ensure they are not transporting petroleum or other items destined for North Korea,” says Abigail Cotterill, of counsel in the International Trade and National Security Practice Group at law firm Kirkland & Ellis. “This exercise should include due diligence on vessels, as well as third parties.”

The latest sanctions are part of an escalated effort by Treasury to target Russian actors’ efforts to circumvent U.S. sanctions. “The Treasury Department is disrupting Russian efforts to circumvent our sanctions,” said Steven Mnuchin, Secretary of the Treasury.

On Aug. 21, OFAC additionally designated two entities and two Russian individuals. As a result of that action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.