Economic Sanctions in a Complex Maritime Landscape

The complexity of global economic sanctions has increased exponentially over the last decade, and the pace of change is continuing to accelerate at an alarming rate in response to ongoing global geopolitical instability. As the war in Ukraine drags on, sanctions have surged in waves, with the UK, EU, and US scrambling to adapt their policies in real time. On the third anniversary of Russia’s invasion (24 February 2025), the EU introduced its 16th sanctions package, imposing a transaction ban on vessels with EU links calling at specific Russian ports, while also extending restrictions on Belarus and Crimea. The UK followed suit, widening its sanctions to target additional entities and trade routes. 

Shipowners, charterers, and insurers are navigating increasingly treacherous regulatory waters, where the risks of inadvertent violations are greater than ever. Restrictions and prohibitions concerning trade with Venezuela, Iran, and now China have all been under the spotlight recently.  Failing to comply can lead to frozen assets and cancelled  or invalid insurance. Reputational damage can be just as costly, and market responses are swift — operators linked to sanctioned activity may struggle to find partners willing to do business with them. 

Due diligence has become an integral part of maritime operations, requiring rigorous screening procedures and expert legal guidance. In a climate where regulations are subject to frequent change, understanding and mitigating sanctions-related risks is no longer optional—it’s imperative.

The expanding scope of economic sanctions

Economic sanctions have expanded far beyond targeting individual governments and businesses. In the maritime sector, restrictions now dictate what cargoes can be transported and insured, which ports can be accessed, and which agents and suppliers can be engaged. Financial transactions must also be handled with caution to ensure that funds do not pass through sanctioned banks or jurisdictions to avoid payments being blocked, delayed, or frozen. By its very nature, the maritime industry operates across borders and those involved in international trade must constantly juggle overlapping—and at times, contradictory—sanctions, turning compliance into a high-stakes balancing act.

Regulators aren’t just playing catch-up anymore—they’re aggressively shutting down loopholes before businesses even have a chance to exploit them. The EU’s latest measures restrict transactions with Russian ports linked to the war effort, while the UK has focused on disrupting supply chains that facilitate sanctioned trade. Meanwhile, the US employs secondary sanctions, penalising foreign companies that engage with restricted entities, extending the reach of its regulatory influence beyond its own borders.

With enforcement authorities using sophisticated tracking tools to detect breaches, maritime businesses must be more vigilant than ever. The risk isn’t just in dealing with current sanctions, it’s also about continual monitoring to ensure that counterparties and trade routes don’t become liabilities down the line. Given the differing approaches taken by the US, UK, and EU, companies operating across multiple jurisdictions must adopt a proactive compliance strategy to avoid costly missteps.

Pre-fixture due diligence, sanctions clauses and the risks of STS transfers

Prior to entering into a fixture, shipowners need to conduct due diligence to assess potential sanctions risks. A detailed review should be undertaken of all counterparties, including charterers, shippers, cargo owners, and financial institutions (including insurers), as well as the cargo itself. While many operators rely on compliance software to screen for red flags, legal expertise remains crucial for spotting hidden risks—like a seemingly safe entity that could land on a sanctions list overnight.

Due diligence also extends to the practical feasibility of a voyage, considering whether ports, trade routes, cargo types, agents or even banks are subject to restrictions under UK, EU, or US sanctions. It is important to identify these potential risks prior to entering into a fixture, as once a charterparty is signed, shipowners may find themselves contractually obligated to perform a voyage that later raises sanctions issues. 

Even if the contract includes a comprehensive sanctions provisions, those clauses will provide inadequate protection when faced with being designated by one of the authorities. 

One area of concern is ship-to-ship (STS) transfers, common in the oil trade. Charterers typically have the right to order an STS transfer, limiting the shipowner’s control over where, from whom, and how cargo is loaded. This presents a significant compliance risk; even when the charterer, shipper, and consignee are well-known, the STS vessel itself and its related parties may be subject to sanctions.

Internal sanctions compliance

Even operators who are not directly subject to sanctions must consider indirect exposure through managers, ultimate beneficial owners, and insurers (or reinsurers) based in jurisdictions where sanctions apply. For example, a shipowner registered in a state where sanctions law is not yet well developed, may still find themselves subject to sanctions if they have a management company or ultimate beneficial owner based in a jurisdiction which is subject to European sanctions. Additionally, if an owner’s P&I insurer has a London presence, UK sanctions will apply to any claims for reimbursement under their P&I policy. These factors must be weighed before fixing a charter to avoid unintended sanctions exposure.

Operators engaged in high-risk trade routes have become well-versed in the complexities and nuances of sanctions compliance. Others take a more conservative approach, avoiding sanctioned regions altogether and incorporating no-Russia clauses into charter parties to eliminate exposure. As enforcement efforts intensify, risk appetite is playing an increasingly decisive role in shaping global shipping patterns, with some companies exiting high-risk markets and others continuing to operate, relying on stringent due diligence.

Fluidity of sanctions

Another of the biggest challenges in sanctions compliance is the fluid nature of sanctions lists, which are frequently updated. A vessel or counterparty that is compliant today may be blacklisted tomorrow. This makes real-time monitoring essential.

Many maritime businesses rely on advanced compliance software and screening tools to assess sanctions risks before entering into agreements. Screening results should ideally be interpreted within the context of a detailed understanding of the underlying sanctions legislation. Regulations are often both complex and broadly drafted, requiring careful interpretation. In addition to statutory provisions, Frequently Asked Questions (FAQs) issued by regulatory bodies like the UK’s Office of Financial Sanctions Implementation (OFSI), the EU, and the US Office of Foreign Assets Control (OFAC) play a significant role in clarifying grey areas in regulations. FAQs have frequently introduced important exemptions that shape how regulations are applied in practice. Though informal, they are a powerful tool for ensuring compliance. Where legislation may broadly prohibit certain actions, the FAQs often clarify specific cases where they are permitted.

The rise of the ‘Dark Fleet’ and secondary sanctions risks

The “Dark Fleet” refers to a growing network of vessels that operate outside mainstream shipping channels to evade sanctions, often engaging in deceptive practices such as AIS manipulation, falsified cargo documentation, and opaque ownership structures. These practices are frequently used to transport sanctioned oil and other restricted commodities, making it difficult for regulators to track their movements.

For legitimate shipowners, the risks of unknowingly interacting with these vessels are significant. Ship-to-ship (STS) transfers, charter arrangements, and cargo dealings can expose compliant operators to unintended sanctions violations.

Beyond direct penalties, secondary sanctions pose an even greater threat. The US, in particular, can impose restrictions on any business that facilitates transactions with sanctioned entities, even if they are not directly subject to its jurisdiction. Given the increasing enforcement focus on shadow shipping practices, rigorous due diligence is now a necessity, not a choice.

The future of sanctions and maritime trade

Sanctions regimes are set to evolve in response to geopolitical tensions, which continue to shape global trade. The Russia-Ukraine conflict stands at a crucial crossroads—whether a diplomatic resolution is reached, or the war continues will significantly influence future sanctions legislation. A negotiated settlement could see some restrictions eased, while a prolonged conflict is likely to see the implementation of stricter measures.  We also know that Venezuela and Iran are areas where political tensions are leading to shifts in the regulations.   

For maritime businesses, continuous adaptation is essential. Sanctions compliance is no longer just about reacting to regulatory updates—it requires proactive risk assessment, real-time monitoring, and the ability to pivot as new restrictions emerge. Shipowners, charterers, and insurers must integrate advanced compliance tools, maintain up-to-date legal guidance, and develop flexible business strategies to navigate an increasingly uncertain regulatory landscape.

Require support with sanctions? 

Shearwater Law has been at the forefront of guiding shipowners through the complexities of sanctions law, with experience extending well before the onset of the Russia-Ukraine conflict. 

Leveraging sophisticated proprietary software, we offer shipowners the opportunity to outsource their sanctions compliance, ensuring adherence to UK regulations and providing insights into EU and US positions with the help of our established network of counterparts where necessary. Our pragmatic approach enables us to identify and mitigate sanctions risks effectively for shipowners, operators, and insurers.

Speak to us today to find out more