Alarming report on sanctions compliance in Sweden

Pursuant to a multi-agency report over sanctions compliance in Sweden, the Swedish police has established that there is most likely significant re-routing of Swedish products to Russia in breach of EU sanctions. Despite this observation, there has only been a handful Swedish investigations regarding potential sanctions breaches. This should be contrasted to the situation in Finland where the Finnish customs reported already in February 2024 that it had initiated 740 investigations. Be that as it may, the Swedish security police has identified the following three modus operandi for sanctions evasion:

• Procurement networks in Sweden that have connections to Russia
• Multinational industrial groups with parent companies in Sweden exporting products to subsidiaries or branches in countries whose authorities do not effectively apply sanctions imposed on Russia, or which have not adopted corresponding sanctions against Russia, with a view to allowing the goods to be re-exported to Russia
• Swedish companies exporting goods to foreign customers unaware that the customers, or the customers' customers, are selling these goods on to Russian end-users in one or more stages

The report also notes the importance of so-called enablers, such as transport intermediaries, lawyers and auditors, that are being used, knowingly or unknowingly, by sanctions evaders to make transactions look legitimate. One further area which is highlighted in the report is M&A. It has been reported that sanction evaders acquire exporting or manufacturing companies in order to secure a certain supply and/or to move assets.

The report is fruitful reading for any company that wants to eliminate the risk to become inadvertently used as a vehicle for sanctions evasion. In this context, it may be noted that The US-China Economic and Security Review Commission (USCC) has issued a report on China’s facilitation of sanctions and export control evasion. Key finds in the report are:

• China is facilitating sanctions and export control evasion on behalf of Russia, Iran, and North Korea 
• China is the largest supplier of dual-use technology to Russia
• Hong Kong has emerged as a global sanctions evasion hub

Regarding financial institutions, the Swedish Financial Supervisory Authority has issued a report over the effectiveness of the sanctions screening procedures of 19 Swedish banks. It transpired that the Swedish banks’ screenings on average were less precise and efficient than the global average.

EU agrees on an EUR 90 billion loan to Ukraine

Pursuant to the asset freeze provisions in Council Regulation 269/2014, it is estimated that Western countries have frozen between $290 and $330 billion in Russian state-owned assets. Most of these assets are held in European banks and financial clearinghouses including Euroclear. For some time, it has been debated whether these assets should be used to support Ukraine. After the preceding week having agreed to immobilize the Russian assets over the long term, on 19th December 2025 EU leaders failed to agree to use those assets. Instead, an EUR 90 billion loan was agreed, meaning that EU Member States (excluding Hungary, Slovakia and Czechia) will borrow EUR 90 billion on the capital markets, backed by the EU budget, and provide this sum to Ukraine over a period of two years. Ukraine will only need to repay the loan once it receives reparations from Russia. Until then, the Russian assets will remain immobilized and the Union reserves its right to make use of the cash balances (essentially consisting of immobilised coupon or dividend and redemption payments and maturing deposits related to the frozen Russian assets) to finance the loan.

Growing implications of the shadow fleet

The number of substandard, aged, and under-insured vessels used by Russia, Venezuela and Iran to move and store oil products over the world outside the scope of western sanctions, is growing. According to Tanker Tracker, there are now more than 1,470 tankers classed as being part of the shadow fleet. This is estimated to constitute between 10% - 20% of all tankers currently transporting oil products.

About 90 of these vessels are estimated to leave Russian ports in the Baltic Sea every month laden with Russian oil, transiting the Gulf of Finland, the Danish Straits, and the English Channel and then often passing the entire EU coastline. Reportedly, 70% of Russia’s seaborne oil is shipped by vessels in this fleet and Russia’s revenues from oil sales amounts to about USD 15 billion per month.

In addition to the increased risk that these vessels will cause marine casualties and, if a casualty occurs, that it will not be properly attended to due to the lack of proper insurance, shadow fleet vessels have been linked to hybrid warfare activities. It has also been reported that the FSB, the Russian federal security service, control some vessels (which are not considered shadow fleet) critical for Russia’s LNG export. Shadow fleet activities have moreover resulted in direct confrontations (see below). Actors within the shipping industry are recommended to be observant of the various risks that this development entails.