UK Russian oil sanctions extended, with jet fuel and diesel carve out

Sanctions law specialist Stacy Keen of Pinsent Masons was commenting after the UK 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.

• Read more: what the Middle East conflict means for your business

In tandem with the new restrictions, the UK’s Office of Trade Sanctions Implementation (OTSI) 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 Keen said the opposite is true – and that the licence is a carve out to new restrictions imposed by UK government. The carve out is a reflection of the pressures on UK supplies of jet fuel and diesel, which are forecast to intensify over the summer.

Keen said: “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. In the guidance it has issued on the new measures, the government 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”.

“The general licence also only provides exemptions from these new UK trade sanctions – there remain other sanctions regimes to consider from a compliance perspective,” said Keen. “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.”

“Further, with the global nature of oil and oil product supply chains, there are also EU and US sanctions regimes to consider,” Keen added.

Oil and gas markets globally have been impacted by the Middle East conflict. Not only has the conflict affected Middle East oil and gas production and refineries in the region, the de facto closure of the Strait of Hormuz, a narrow sea passage in the region, linked to the conflict has placed major constraints on the distribution of available supplies globally.

The price of crude oil has jumped around 50% since the conflict began, with some analysts predicting further price increases absent a resolution to the conflict. The availability and price of products derived from crude oil have been affected too – including jet fuel, as Alan Sheeley and Daniel Gardiner of Pinsent Masons, who help businesses resolve commercial disputes, recently highlighted.

Gardiner said: “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.”

The International Energy Agency (IEA) last month highlighted (67-page / 3MB PDF) that around 75% of Europe’s net jet fuel imports comes from the Middle East. Since the conflict began, Europe and Asia’s supplies of Jet A have been diminishing, as shipments that had made it out of the Strait of Hormuz before the conflict began, and domestic and foreign stockpiles that had been built up, are used.

The IEA has mapped out one scenario where “physical shortages” of jet fuel, “flight cancellations” and “demand destruction” could arise from June, even before summer season demand for fights hits its peak. The International Air Transport Association (IATA), which represents global airlines, described the IEA’s assessment of the potential shortages as “sobering” and said that by its own estimations, a lack of jet fuel could account for flight cancellations in Europe by the end of May. The IATA has advocated that airlines switch to Jet A-1 fuel type, which has a lower freezing point and is commonly used in North America, to mitigate some of the pressures.

In the UK, the government has already given the airline industry scope to consolidate services in the event shortages materialise, to ensure efficient use of available jet fuel supply.

Sheeley said: “It remains to be seen whether the new carve out will actually assist the market with managing the supply constraints arising from the events in the Middle East.”

In its guidance, the government explained that the new restrictions it has imposed would not apply to the import of the mix of non-sanctioned third country processed oil products with third country processed oil products otherwise caught by the restrictions where the latter constitutes ‘tank heel’ – a term used to describe the quantity of oil that cannot be removed from containers for fear of causing damage to those containers.

The government has also confirmed that where an oil product is produced in a third country using crude oil that originates in another third country, is not Russian owned, and has only transited through or departed from Russia, that product can be imported to the UK. It cited the example of Kazakh oil that is mixed with small volumes of Russian crude as it transits through pipelines in Russia. This, it said, would be categorised as oil of Kazakh origin and not caught by the new restrictions.

However, the government said the new measures otherwise apply to the co-mingling of oil products produced in a third country from crude oil comprised of Russian oil with oil of another origin, as well as to co-mingled oil products comprised of oil products produced in a third country using Russian crude. 

Further, it added that vessels entering UK ports, and aircraft operating flights between a third country and the UK, will not have to verify the origin of the crude oil used in the processing of the fuel used for their journeys.

Beyond the measures concerning oil, the updated UK Russia sanctions regulations contain other new restrictions.

For example, the package prohibits the supply or delivery by ship of Russian origin liquefied natural gas (LNG), and the provision of services related to such supply or delivery.  There is an exception until 1 January 2027 for contracts concluded before 17 June 2025 provided that the contract term exceeds one year and the terms of the contract were not amended post 17 January 2025, subject to limited carve outs. There is a new general licence from OTSI that permits certain supplies and deliveries connected to the Sakhalin-2 LNG and Yamal LNG terminals.

There are further new restrictions on the provision of construction services to persons connected with Russia, expanding on the existing prohibition on the provision of engineering services, as well as in relation to dealings with Russian-origin or -located uranium, certain exports, and on the provision of services in relation to specified ships, and relating to their acquisition, sale, transfer or supply.