1 Nov 2022 13:16

Russian oil shipped before Dec 5 and delivered before Jan 19 not subject to price cap - OFAC

MOSCOW. Nov 1 (Interfax) - The price cap will not apply to Russian oil shipped before December 5 and delivered before January 19, the United States Treasury Department's Office of Foreign Assets Control (OFAC) said.

"U.S. service providers can continue to provide services related to the maritime transport of crude oil of Russian Federation origin purchased at a price above the price cap, provided that the crude oil is loaded onto a vessel at the port of loading for maritime transport prior to 12:01 a.m., eastern standard time, December 5, 2022, and unloaded at the port of destination prior to 12:01 a.m., eastern standard time, January 19, 2023," OFAC said in Financial Sanctions FAQs.

OFAC gave an example of a permissible transaction in line with the maritime services policy: "A U.S. commodities trader signs a contract on November 1, 2022, to purchase crude oil of Russian Federation origin for shipment to a jurisdiction that has not prohibited the import of such crude oil. The U.S. commodities trader arranges for the oil to be loaded onto a vessel at the port of loading. The vessel is loaded on December 1, 2022, and a bill of lading is issued. The oil is shipped and discharged at the port of destination on December 15, 2022. U.S. insurance companies provide cover for this shipment/voyage and pay out any related claims, as appropriate."

G7 countries approved a plan in September to impose a price cap on Russian oil with the aim of restricting Russia's budget revenues from the sale of energy resources. Starting December 5, western companies will be able to service and insure tankers carrying Russian oil throughout the world that is exempt from embargo only if it is purchased for a price that is lower than a certain ceiling. Similar restrictions will go into effect for oil products on February 5, 2023

OFAC said in preliminary price cap guidance that the regulator allows U.S. companies to provide insurance and maritime transportation services for oil after December 5 if its price does not exceed that set by the cap. Otherwise, such actions are prohibited.

But an actual price ceiling for oil from Russia has not yet been announced. Bloomberg, citing sources, reported a few days that the Biden administration was scaling back the plan to impose the price cap on Russian crude due to "skepticism by investors and growing risk in financial markets brought on by crude volatility and central bank efforts to tame inflation."