Are loopholes undermining Australia’s support for Ukraine?

Australia’s support for Ukraine is being undermined, a senate committee has heard, because of what some say are loopholes in its sanctions against Russia.

Experts and community leaders raised the concerns last week during a Senate committee hearing examining the effectiveness of Australia’s sanctions against Russia.

With nearly 2,000 measures in place, Russia is the most sanctioned country by Australia. More than 1,600 have come in response to Russia’s full-scale invasion of Ukraine in 2022.

Sanctions form part of a broader effort to increase economic and political pressure on the Kremlin, and the federal government has previously said that Russia, and those supporting its illegal invasion of Ukraine, will “face consequences”.

The federal government has also provided military aid, humanitarian and energy assistance to Ukraine.

But despite large number of measures, the committee heard that aspects of the sanctions framework — including exemptions and enforcement mechanisms — may be weakening their overall impact.

Payments from sanctioned individuals, entities is legal

Australian law does not prohibit receiving payments from sanctioned individuals and entities.

In early 2025, experts speaking to SBS Russian questioned whether doing so would constitute a breach of the sanctions regime after Australian tennis player Thanasi Kokkinakis participated in a tournament sponsored by Gazprom — a Russian state-owned company that is sanctioned in Australia.

Later that year, the Department of Foreign Affairs and Trade (DFAT) published an explanatory note that receiving payments from sanctioned entities did not breach Australia’s law.

Baron Morkoc, a researcher at the Australian National University’s Law Reform and Social Justice Research Hub, said told the hearing that this was “concerning”.

“The reason that pathway is open is for legitimate payments such as pensions, like Russian pensioners living in Australia. Comparative to other international practice, namely the United Kingdom and the United States, that is an irregularity,” Morkoc said.

He explained that in those other countries, exemption licences are issued to allow certain transactions, like the payment of pensions from the Central Bank of Russia.

“Those states have banned sanctioned persons being able to pay their domestic citizens. […] They have taken the pathway of exemption licences to allow that transaction to continue rather than a wholesale exemption for payments in general.”

Calls to identify and freeze Russian assets

Frozen Russian assets in Australia were also in the spotlight, and Dr Anton Moiseienko, associate professor of law at the Australian National University, said there was a need to identify all of them.

He said the Australian government previously stated the total amount of Russian assets in Australia, both state-owned and private, is $100 million.

“At the same time, Euroclear, which is a Belgian clearing house that holds Russian state-owned property for the Russian Central Bank, stated repeatedly that 2 per cent of their Russian asset holdings are denominated in Australian dollars,” Moiseienko said.

“Two per cent of what they hold for the Russian Central Bank amounts to approximately $6.7 billion.”

Moiseienko said that the exact assets in question are unknown, with one possible explanation being that there may be bank accounts in Australia opened in the interests of the Central Bank of Russia, but formally owned by Euroclear.

Therefore, these assets are not identified in Australia as belonging to the Central Bank of Russia and are not frozen.

“It is, however, paramount that the Australian public knows the precise amount of Russian sovereign wealth that is held in Australia, directly or indirectly,” he said.

“I would hope that the committee has an opportunity to inquire of the Australian Sanctions Office what efforts have been taken to account for that figure in Euroclear’s reporting and identify any indirect holdings of Russian state wealth in Australia.”

In response, Julie Heckscher from DFAT’s regulatory and legal policy division confirmed the department was aware of $100 million in frozen Russian assets in Australia.

She said that under the Australian sanctions law, the department has no authority to take any action with the assets other than freezing them.

Imports of ‘blood oil’ products continue

Australia remains the single biggest buyer of oil products refined from Russian crude in third countries, according to several submissions to the inquiry and experts who appeared at the hearing.

SBS News first reported on this loophole in July 2024. The issue was also mentioned in two separate senate inquiries.

In October 2025, SBS News also revealed that sanctioned shadow fleet tankers were still appearing in the supply chains of Australian companies.

Pressure from experts and community members on the government to close the so-called “blood oil” loophole grew significantly in 2025, with Foreign Minister Penny Wong saying the government expected the industry “to prevent their supply chains from inadvertently funding Russia’s illegal and immoral invasion of Ukraine”.

Vaibhav Raghunandan, European Union-Russia analyst at the Centre for Research on Energy and Clean Air (CREA), appearing via video call from Amsterdam, said the EU’s recent ban on oil products refined from Russian crude in third countries has resulted in drops in Russian sales of crude globally.

He added, however, that sanctions did not work in isolation and “the lack of coordination between Ukraine’s allies has helped Russia find circumvention techniques that require further sanctions adaptation”.

“They [Australia] have purchased a fourth of all the volume from refineries CREA has identified as using Russia in 2025. Some refineries that do not consider the EU an important market do consider Australia to be one.

“Australia, therefore, holds a unique position of being able to further constrict Russian revenues from crude by banning this trade.”

Andrew Mencinsky, president of the Ukrainian Council of NSW, called on the government to close the loophole.

“These imports are estimated to have delivered $2.5 billion in revenue to the Kremlin, which far outweighs the $1.7 billion in aid that has been provided in support to Ukraine,” he said at the hearing.

“Quite frankly, this is appalling. It’s shocking. It’s unjustifiable and it’s unacceptable to every person to whom I speak. This has to stop.”

Spliced oil in third nations was hard to track and its origin couldn’t be reliably determined, according to the Department of Foreign Affairs.

“Russia’s large share of the global oil supply and the mingling of oil products makes eliminating the revenue Russia gains from these sales a complex challenge,” DFAT first assistant secretary Christian Hirst said.

Australia was considering options on how to limit Russian crude oil via third parties, including by monitoring Europe’s sanctions on refined oil and how the UK would implement its upcoming ban, Hirst said.

Australian officials in India were working with industry on Russian oil being blended during refinery, he added.

Representatives from the Australian Institute of Petroleum said the industry would comply with any other sanctions.

However, they said “the design of another set of sanctions would need to be done carefully to ensure fuel security and fuel prices are not put at risk, and that would need consultation with the industry.”

International research tracked where Russian oil was being sent, meaning tainted refineries were identifiable, Australian Federation of Ukrainian Organisations chair Kateryna Argyrou said, urging a ban on any amount of Russian oil.

“Whether you have that middle laundromat, as some have referred to it, that launders this Russian crude and then exports it as non-Russian, the origin is still the same, the money is flowing to the Russian Federation,” she told the hearing.

The onus should be on industry to ensure their supply chain was clean, just as corporations need to do under modern slavery laws, she said.

Enforcement powers questioned

Any sanctions regulation should be backed by strong and well-resourced enforcement, the committee heard.

Clancy Moore, chief executive officer at Transparency International Australia, mentioned a federal court case from early 2024 that ruled that an Australian company, Tigers Realm, was likely in breach of the sanctions regime.

SBS followed the case of Tigers Realm in 2023 and in 2024. The ASX-listed company continued mining coal in Russia’s Chukotka region, despite the product being sanctioned in Australia.

The Federal Court later ruled that the company might be in breach of sanctions, and Tigers Realm announced the sale of its Russian assets.

However, as Moore suggested, there hasn’t been any known enforcement based on the court’s judgment.

“There was a clear potential breach, but we’re yet to hear any kind of enforcement on that particular case,” Moore said.

Moiseienko reiterated that unless sanctions were backed up by strong enforcement, “all these measures amount to no more than a press release”.

“Over the past four years, we have not seen any examples of enforcement action in Australia in connection with Russia’s sanctions, unlike, for example, in India, the EU, the United Kingdom, the United States or Canada,” Moiseienko said.

Hekscher said the department has increased its outreach and compliance support for the Australian public, and it continuously works across the government to “make sure to the best we can that Australia is not contributing to Russian sanctions evasion”.

“But I’m not going to pretend we have all the answers, [that] we’ve closed all the loopholes [or] closed all the gaps. This is a constant evolution with a set of sophisticated adversaries trying to find ways to avoid and hide transactions.”

The Senate committee’s report Russia is set to be tabled at the end of March 2026.

— With reporting by the Australian Associated Press.

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