Tigers Realm Coal ramps up its Russian coal operations despite a potential breach of sanctions

Russian coal producer Tigers Realm is increasing exports as it challenges through the courts Australia’s sanctions against Russia.

Tigers Realm Coal could breach Australian sanctions against the regime of Russian President Vladimir Putin. Picture: AFP

ASX-listed coal producer Tigers Realm Coal has continued to mine and ship from its Russian operations, despite being told by foreign affairs officials its work may put the company in breach of Australia’s sanctions regime.

Tigers Realm is challenging in the federal court the applications of Australian sanctions against Russia, but a first hearing on the matter is not due until August 8 and the court has not issued any orders on the case.

The company disclosed it had received advice in April it may be breaching sanctions and in June, shortly after lodging the federal court action. Tigers Realm said it elected to not apply to Foreign Minister Penny Wong for an exemption to the sanction regulations as it “determined it is not appropriate to do so where the company does not consider its operations fall within the scope”.

The company’s June quarter production report, released on Friday, shows it is still mining and shipping coal from Russia to the company’s Chinese customers, despite the DFAT warning. The report says it had sold 260,000 tonnes of coal in the quarter, after delivering 277,000 tonnes of product to the Russian port of Beringovsky.

The company said it had ramped up both mining and shipping compared to the March period – traditionally a slow one, given that the fierce Russian winters severely inhibit most mining operations.

Tigers Realm said it still expected to sell 1.1 million tonnes of coal in 2023, after selling 265,000 tonnes in the first half of the year.

The report shows the company is running down its cash reserves, ending June with $US2m ($2.95m), down from $7.2m at the end of December.

The federal court has refused to release documents to The Australian setting out the details of Tigers Realm’s challenge to Australia’s sanctions, ahead of the first court hearing in August.

But the company’s statement of claim shows it is challenging advice from DFAT that the transport of coal from its mines and then on to a cargo vessel for sale was likely to breach Australian laws.

The court documents show Tigers Realm is seeking to first challenge the application of the law to its transport of goods from the mine to ports, arguing the regulations should not apply to “the movement of coal by the Russian subsidiaries within Russia where that movement of coal is preparatory to the export of the coal”; and that the carriage of coal is not “transport” within the meaning of the regulations.

But the company is also seeking to challenge the entire application of the sanctions laws to its operations, arguing the regulation DFAT says it is breaching is “invalid as being in excess of the power of the Governor-General” under Australian sanctions laws.

Australia ramped up its sanctions against Russia and Russian officials tied to the administration of President Vladimir Putin in the wake of the country’s invasion of Ukraine in early 2022.

Company documents show Tigers Realm restructured its business arrangements in the wake of the new sanctions, and established a new trading subsidiary, TIG Trading DMCC, in the UAE in June 2022.

Tigers Realm had also flagged a broader company restructure and possible privatisation, but said in July it had shelved those plans in the face of regulatory uncertainty in both Australia and Russia.

Breaking sanctions laws is a crime punishable by up to 10 years’ jail for an individual.

Under the Autonomous Sanctions Act, individuals can also be fined up to three times the value of the transaction or transactions involved in the breach, or $782,500, whichever is greater.

Companies can be fined up to three times the value of the transactions involved or $3.13m.

However, a company can escape conviction if it shows it “took reasonable precautions, and exercised due diligence” to avoid a breach.

The Australian Federal Police last week declined to comment on whether it was investigating potential breaches of Australian sanctions by Tigers Realm.

Transparency International Australia chief executive Clancy Moore said the company’s latest quarterly report showed it was still potentially breaching Australian laws.

“Tigers Realm Coal’s quarterly statement clearly shows the company digging up and exporting Russian coal most likely bound for China. As Russian coal is a sanctioned good under Australia’s sanctions regime this could be a potential breach of sanctions,” he said.

“What‘s more, the continued operations of Tigers Realm Coal would also appear to go against the stated objectives of Australia’s sanctions in Russia.”

In addition to its Russian operations, the company’s third largest shareholder is also the target of direct sanctions in Australia and the US.

The Russian Direct Investment Fund (RDIF) holds about 8 per cent of the company, and was described by the US Department of Treasury last year as “widely considered a slush fund for President Vladimir Putin”.

Lawyers for the RDIF wrote to The Australian in July complaining the characterisation had “absolutely no basis”.

“According to official documents on sanctioned entities, the sanctions against RDIF are solely meant to prevent the Russian economy from attracting financial resources and have not been imposed for any specific wrongdoing,” the letter said.

“The only reason for imposition of sanctions against RDIF articulated by the US Department of the Treasury was ‘for being owned or controlled by, or for acting or purporting to act for or on behalf of, directly or indirectly, the government of Russia’.

“RDIF has rightfully earned reputation as a trustworthy and irreproachable investment fund managed under professional leadership of the highest quality.”

Originally published as Tigers Realm Coal ramps up its Russian coal operations despite a potential breach of sanctions