Azerbaijan & Black Sea Oil: EU Sanctions Impact

Georgia’s Black Sea port of Kulevi, a key transit point for oil shipments, is facing potential European Union sanctions amid allegations it’s being used to help Russia move crude oil to finance its war in Ukraine. The move would place Azerbaijan, whose state-controlled energy entity SOCAR owns an oil terminal at Kulevi, in a difficult position.

EU Considers Sanctions on Kulevi Port

The EU is considering banning transactions with four ports allegedly used for Russian oil exports, including Kulevi in western Georgia, according to a draft of the bloc’s upcoming 20th sanctions package obtained by RFE/RL. If adopted, the sanctions would represent a significant escalation in efforts to target Moscow’s export routes and those suspected of aiding them internationally.

The draft document alleges Kulevi is being used “for the maritime transportation of crude oil or petroleum products produced in Russia or exported by Russian ships that use irregular and high-risk shipping practices.” Reuters also reported the potential addition of Kulevi in Georgia and Karimun in Indonesia to the EU blacklist.

Concerns Over Russian Crude Trafficking

SOCAR launched the Kulevi oil terminal in 2008. Concerns about the port’s role in illicit trafficking of Russian crude intensified late last year after the tanker Kayseri sailed from Novorossiysk, Russia, and delivered over 105,000 metric tons of oil to a newly built refinery in Kulevi. This refinery is a separate entity from the SOCAR-owned facility and is owned by individuals with close ties to Georgia’s ruling Georgian Dream party.

Georgian authorities have denied involvement in sanctions-busting activities. However, the Kayseri was later added to the EU’s sanctions list targeting vessels connected to Russia’s so-called shadow fleet.

Political and Financial Ties

The refinery is operated by Black Sea Petroleum, owned by Maka Asatiani, a businessman linked to the Georgian Dream party. Reports indicate Asatiani’s son has business ties with the son of a senior official of Russia’s military intelligence service, the GRU. Former Georgian Dream economy minister Levan Davitashvili was appointed chairman of the refinery’s board in September, highlighting the ruling party’s increasing stake in the project.

Prime Minister Irakli Kobakhidze has dismissed allegations of wrongdoing, stating his government has provided EU officials with supporting documentation. “We don’t think there’s anything going on there that goes against the sanctions policy,” Kobakhidze said. “We comply with the sanctions regime.”

Azerbaijan’s Response and Broader Implications

State-controlled media outlets in Azerbaijan argue that sanctions against Kulevi are unjustified, suggesting the focus should be on companies from Greece and Malta that allegedly control a significant portion of the shadow fleet. They also contend that sanctions could negatively impact the port’s function as part of the Middle Corridor infrastructure.

If approved, this would be the first time the EU has directly targeted ports in third countries over Russia-related sanctions. The package also proposes using an anti-circumvention tool against a third country for the first time, with new restrictions on sales of metal-cutting machines and communications equipment to Kyrgyzstan, and proposed sanctions against two Kyrgyz banks and one in Tajikistan for allegedly enabling sanctions-busting transactions using cryptocurrency.

Strained Relations with the EU

Sanctions on Kulevi would likely further strain already tense relations between Georgia and the EU. Georgia’s EU accession talks have stalled, and Georgian Dream officials face diplomatic visa restrictions in EU member states. Brussels is also considering suspending visa-free travel over the government’s crackdown on democratic standards. EU Enlargement Commissioner Marta Kos visited Armenia and Azerbaijan last September but notably skipped Georgia, and US Vice President JD Vance recently visited Yerevan and Baku without stopping in Tbilisi.