Azerbaijan's ASCO challenges sanctions imposed on its vessels over alleged Russia link

Azerbaijan Caspian Shipping (ASCO) CJSC has initiated legal proceedings, preparing an appeal against unfair international maritime sanctions imposed on five of its vessels in 2025 over allegations of transporting crude oil of Russian origin.

In its 2025 activity report, ASCO highlights its disagreement with the sanctions, with the appeal to demonstrate that neither the company nor its joint venture violated the applicable sanctions regulations. The process is ongoing, and it is currently difficult to predict when the courts will issue a decision, Caliber.Az reports.

ASCO maintains that it is closely monitoring the situation and remains prepared to take all available legal and other measures to protect its lawful rights and interests.

The report notes that two of the five vessels are directly owned by ASCO, while the other three are co-owned through the company’s subsidiary joint venture, SA Maritime AFZECO.

All five ships were placed on sanctions lists by the European Union, the United Kingdom, and Canada, causing significant disruption to ASCO’s operational activities and financial interests.

Meanwhile, local media outlet Oxu.Az reports that ASCO carried out a controversial bond transaction in 2024 valued at nearly 158 million manats ($92.9 million), according to ASCO’s 2024 consolidated financial report.

The report reveals that on March 12, 2024, ASCO purchased bonds issued by a jointly controlled entity, in accordance with instructions from the Cabinet of Ministers of Azerbaijan.

At initial recognition, the bonds were recorded at fair value, and the difference of 55.583 million manats ($32.7 million) between fair value and book value was recognised directly in equity, reflecting the fact that the transaction was carried out with a related entity under government mandate.

“In determining the fair value of the bonds, an assumed credit rating of CCC+, the issuer’s financial performance, and liquidity were considered, with a market yield assessed at 17.01%. If the discount rate used in the calculation had been 1% higher or lower than management’s estimate, the fair value of the bonds would have decreased by 2.926 million manats ($1.72 million) or increased by 3.44 million manats ($2.02 million), respectively.”

ASCO’s management assessed the credit risk of the bonds since initial recognition. Due to payment delays and the issuer’s deteriorating financial position, the bonds were classified as Stage 3 impaired assets, equivalent to default stage in financial literature.

Based on the annual Moody’s Default Study (GKZ), a 100% probability of default was assigned to the issuer. Consequently, an impairment loss of 69.623 million manats ($40.9 million) was recognised directly in equity, consistent with transactions between entities under common control.

The report did not disclose the name of the organisation whose bonds were acquired for the 158 million manat transaction.

By Khagan Isayev