Russian Trade Routed Through British Overseas Territories Amid Sanctions

Since the invasion of Ukraine in 2022, Russian companies have reportedly routed approximately $8 billion (£5.9 billion) of trade through British overseas territories, including the British Virgin Islands (BVI), Bermuda, the Cayman Islands, and Gibraltar. This trade encompasses a variety of goods, notably oil-drilling equipment and luxury yachts, and has raised concerns regarding the effectiveness of sanctions imposed on Russia. The analysis, conducted by the Russian office of Transparency International, highlights over 29,000 transactions, revealing significant involvement of entities linked to the Kremlin.

The Guardian

The report indicates that more than 95% of the trade was concentrated in four territories: the BVI, Bermuda, the Cayman Islands, and Gibraltar. Notable transactions included 65 yacht-related deals in 2022, which increased to 97 in 2023, with some deliveries reaching annexed regions of Crimea. Specific vessels, such as the $100 million Universe, have been linked to high-profile figures like Dmitry Medvedev, while the Marlin yacht was reportedly acquired by oligarch Suleyman Kerimov, both of whom are under UK sanctions.

The Guardian

The BVI has been identified as a primary hub for Russian exports, with $4.4 billion in trade, including coal from occupied Ukrainian territories. The BVI government has faced criticism for its slow progress in establishing a publicly accessible register of corporate ownership, which is seen as essential for transparency. In contrast, Bermuda facilitated nearly $3 billion in transactions, primarily involving drilling equipment for the Sakhalin-2 oil and gas project, which is now majority-owned by Gazprom after the exit of Shell.

The Guardian

UK Minister for Overseas Territories, Stephen Doughty, praised Operation Hektor, a joint initiative aimed at freezing Russian assets, which has reportedly secured over $9.7 billion (£7.2 billion). The BVI government asserted that it has frozen more than $400 million in Russian assets and established a sanctions unit to enforce compliance with UK regulations. Bermuda's representatives emphasized their commitment to upholding sanctions and maintaining jurisdictional integrity.

The Guardian

Transparency International criticized the ongoing issues of illicit financial flows and sanctions circumvention through unaccountable jurisdictions. The UK government has been accused of yielding to BVI's demands, allowing limitations on access to beneficial ownership registers. Critics argue that these measures undermine the effectiveness of sanctions and facilitate continued trade with Russia.

The Guardian

While the report from Transparency International provides extensive data on the trade routes and transactions, there are discrepancies regarding the extent of sanctions compliance and the actual impact of these overseas territories on the enforcement of UK sanctions. The BVI claims that the reported data does not indicate any sanctions breaches, raising questions about the accuracy of the findings.

The Guardian

“Unfortunately, for many years now, we have observed a dysfunctional equilibrium in which illicit financial flows, tax evasion, sanctions circumvention and other forms of misconduct are channelled through firms and intermediaries registered in unaccountable jurisdictions.” — Transparency International

The Guardian

“We do not comment on individual cases; however, the sanctions regimes in force in Bermuda prohibit a range of activities and transactions and contain specific exceptions and licensing grounds.” — Bermuda Government Spokesperson

The Guardian

“Gibraltar said it was a “leader in transparency” as the first overseas territory to establish a register of beneficial ownership, adding that transactions involving Gibraltar companies made up less than 1% of the trade in the report.” — Gibraltar Government Spokesperson

The Guardian