An update on the efficacy of sanctions against Russia

Analysis indicates U.S. sanctions are significantly more effective at reducing activity of Russian-controlled vessels, causing an 80% drop, likely due to greater fear of secondary sanctions. While the EU and UK have dramatically increased their sanctioned vessel counts to over 400 each, the U.S. has lagged with 216, leaving 359 vessels sanctioned by EU/UK but not the U.S. This disparity underscores the critical importance of renewed U.S. sanctioning efforts to maximize pressure on Russia's oil revenue and potentially influence geopolitical outcomes.

Analysis

Recent analysis indicates a significant divergence in the efficacy and application of sanctions against Russian-controlled maritime assets. U.S. sanctions are correlated with a sharp reduction in vessel activity, showing an approximate 80% drop compared to 2021 levels, a stark contrast to the 80% increase in activity observed in unsanctioned vessels. This heightened effectiveness is likely attributable to the market's greater fear of U.S. secondary sanctions. Despite this, the U.S. has ceased expanding its sanctions list, which has remained static at 216 vessels since January 2025. In parallel, the EU and UK have aggressively ramped up their efforts, sanctioning 444 and 423 vessels respectively. This has improved coordination between the EU and UK, with 247 vessels now jointly sanctioned, but has also created a critical gap where 359 vessels sanctioned by European authorities remain untouched by the more potent U.S. restrictions, thereby diluting the overall economic pressure on Russia's oil trade.

Key Decisions for Investors

• Investors should closely monitor for any change in U.S. sanctions policy, as a renewed alignment with the EU and UK would immediately place 359 additional vessels at risk, potentially disrupting oil supply logistics and impacting freight rates.
• The bifurcation in vessel activity—an 80% drop for U.S.-sanctioned ships versus an 80% rise for unsanctioned ones—suggests that tanker operators without exposure to the Russian trade may command a premium, while those involved face significant latent regulatory and headline risk.
• For those with exposure to energy commodities, the current inefficiency of non-U.S. sanctions implies that a substantial portion of Russian oil supply remains on the market, but any move by the U.S. to close this gap could trigger a rapid tightening of supply and a spike in oil prices.
• Portfolio managers should scrutinize the due diligence processes of shipping and insurance companies, as the complex and overlapping sanctions landscape increases the risk of inadvertent exposure to sanctioned entities, particularly those operating in the U.S.-EU/UK sanctions gap.