December 22, 2023 [Microsoft Start]- The U.S. stepped up enforcement of sanctions on Russian energy, targeting upstart trading companies that have kept a gusher of oil income flowing to the Kremlin.

The Treasury Department imposed blocking sanctions Wednesday on three trading firms that have emerged as players in the Russian petroleum market since the 2022 invasion of Ukraine. Treasury also sanctioned a tanker company owned by Moscow and tightened the requirements on Western companies involved in the Russian oil market.

Blocking sanctions cut off named companies from the U.S. financial system and forbid Americans from doing business with them.

The move is meant to shore up a novel sanctions regime that has struggled to reduce Russia’s revenue from oil sales. Deputy Treasury Secretary Wally Adeyemo said the measures would hurt the Russian war chest while maintaining stability in global energy markets.

A price cap imposed by the U.S. and its allies a year ago seemed at first to succeed in its objectives, to keep Moscow’s oil on the market but reduce profits from each barrel. In recent months, however, Russian crude and fuel have mostly traded above the caps and the Kremlin’s coffers have bulged with money from the sales.

Russia sidestepped the cap in part by funneling oil exports through companies that have limited interaction with the Western financial system and give few public clues about who controls them. These entities have replaced the major Western traders that retreated from Russia after the invasion.

Traders with opaque ownership structures now ship up to half of Russia’s oil exports, the Treasury Department said Wednesday.

It said one of the companies targeted with sanctions—Hong Kong-based Bellatrix Energy—had traded tens of millions of metric tons of petroleum from state Russian companies since the start of the war. Vessels chartered by the company had made more than 150 port calls in Russia since mid-June 2023 alone, according to Treasury.

In July, The Wall Street Journal reported that Bellatrix was a big winner in a tender through which Russia’s state-backed Rosneft Oil had sold a substantial portion of its output. Bellatrix has also shipped crude from Surgutneftegas, a major private producer, according to customs data analyzed by the Kyiv School of Economics. Bellatrix received a loan of up to $350 million from a Russian state bank late last year, company filings show.

The Treasury Department said tweaks to the price cap would complicate efforts by Russian exporters to circumvent the regime. Among other steps, market players will have to share detailed information about the cost of freight and insurance to their counterparties. Traders have busted the cap in part by inflating these bills, according to analysts.

Beyond Bellatrix, the Treasury Department hit United Arab Emirates-based Voliton with blocking sanctions as well as Covart Energy in Hong Kong. It said that three ships that Covart has chartered for Russian voyages have been involved in moving oil priced above the $60-a-barrel cap, and that the firm owns a Russia-flagged ship called Sanar 15.

In another step toward tougher enforcement, the U.A.E.-based Sun Ship Management was also sanctioned by the Treasury Department. The company, which runs a fleet of tankers and is controlled by Russia’s state-backed shipping operator Sovcomflot, is already subject to European Union and U.K. sanctions.

This fall, officials in the U.S. and its allies said they were preparing to crack down on evasion. Until Wednesday, though, the U.S. hadn’t targeted any significant market players as officials balanced their aim of hurting the Russian budget against concern about shaking the oil market.

Other countries have also tried to increase the pressure on Russia’s economy. Last month, the U.K imposed sanctions on people and companies that the government said had helped to prop up the Russian war economy through the gold and oil markets.

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