Cyprus-flagged ships violate US sanctions at their own risk: Cyprus Shipping Chamber

Cyprus-flagged ships that violate US sanctions do so at their own risk, but Cyprus is not legally obliged to enforce sanctions imposed only be the US, the Cyprus Shipping Chamber has said.

The association was responding to a Lloyd’s List article which stated that the Cyprus maritime and business sector was being used by shipowners in the EU to register and flag tankers involved in Venezuelan oil trades. It was the first time that an EU member country had been observed registering and flagging vessels shipping US-sanctioned crude from Venezuela

“These shipping lines are not members of the Cyprus Shipping Chamber, however. Our members respect global sanctions”, said Thomas Kazakos, director general of the Cyprus Shipping Chamber, in an interview with the Cyprus Mail.

An influx of tanker tonnage to the Cyprus flag registry, the world’s 11th-largest, was signalling a strategic shift from owners and was leading to a test on the limits of US enforcement.

In January 2019 the US said that Petroleos de Venezuela SA (PDVSA) was to become part of the Specially Designated Nationals List (SDN). The immediate effect was that US persons were generally prohibited from engaging in any transactions with PdVSA and all of PdVSA’s property and interest in property in the US

These restrictions also applied to any entity 50% or more owned by PdVSA.

Kazakos pointed out the Cyprus Shipping Chamber expected its members to comply with all global sanctions – those of the US, the EU, and those of the UN. “We treat these all as part of a global framework,” he said. Nonetheless, Cyprus had no legal obligation to enforce US sanctions. The country’s deputy shipping ministry told Lloyd’s List that the Republic of Cyprus was only committed to enforcing EU and UN sanctions and not those imposed by the US.

Cyprus “has no competence or legal basis for enforcing sanctions that have not been imposed by either the UN or the EU,” the ministry said in an emailed response. “The US SDN List, in and of itself, does not have extraterritorial effect; that is, the naming of an entity to the SDN List does not automatically mean that non-US persons are subject to sanctions if they deal with that entity”, said law firm Hogan & Mahar in a note. US sanctions are implemented by the Office of Foreign Assets Control (OFAC). “If a party is placed on the SDN List, it is effectively cut off from a major portion of international business and financial transactions, access to most bank accounts and restrictions on international travel. As a result, the restricted party lists had become a powerful tool for the US to isolate foreign adversaries and advance its interests around the world short of taking military action”, said law firm Williams Mullen