1 Feb 2023 10:57

Russian oil companies prohibited from selling products at price cap beginning February 1

MOSCOW. Feb 1 (Interfax) - Russian oil companies as of Wednesday have been banned from selling oil and petroleum products if the text of a contract contains the price cap conditions set by the G7 countries.

The corresponding decree was signed by President Vladimir Putin at the end of 2022 in response to the implementation of the price cap by the G7 countries. The price cap stipulates that companies from the G7 countries and the European Union are permitted to ship Russian oil and petroleum products, as well as provide services related to their seaborne transportation, only if said products are sold at the price cap, which is $60 per barrel for oil. A price cap has not been determined yet for petroleum products.

It is expected that the corresponding price cap will be set before February 5, when the embargo on the importation of Russian petroleum products by EU countries enters into force. The price cap is designed to limit Russia's income from fuel exports, while maintaining the supply of energy resources on the global market.

The presidential decree is valid until July 1, 2023, and it applies at all stages of supplying to the end buyer. Regular monitoring for compliance with the decree is entrusted to the Energy Ministry. Meantime, Putin can make exceptions to the ban based on a special decision.

Prime Minister Mikhail Mishustin has already signed a resolution that defines the rules for monitoring the implementation of the decree.

Consequently, the companies themselves and individuals that have concluded supply contracts are obliged not to allow the presence of price cap provisions in contracts and addendums to them. Companies must also ensure that non-application of price cap is monitored all the way to the end buyer.

If such information is discovered, exporters must report it to the Federal Customs Service (FCS) and to the Energy Ministry, and eliminate the violation or indicate that it cannot be eliminated.

Moreover, suppliers must provide the FCS with a supply contract, as well as a declaration confirming that there are no price cap provisions. The resolution comes into force on February 1 and applies to products exported as of February 1.

The Energy Ministry, in agreement with the Finance Ministry, must approve by March 1 the procedure for monitoring prices for Russian oil supplied for export. Upon the request of the Energy Ministry, suppliers of crude must provide the ministry with copies of contracts and addendums to them, as translated into Russian.

Additionally, companies will submit to the Energy Ministry informational materials on the actual execution of contracts for the supply of products, including, among other things, information about foreign buyers, directions and conditions for the supply of products, features of logistics and insurance, and other data on the results of monitoring non-application of the price cap.

Based on this, the Energy Ministry will prepare a report on the results of monitoring information from suppliers and the FCS, as well as the results of monitoring prices for Russian oil supplied for export.

The date of the ban on the export of petroleum products subject to the price cap will be determined by the Russian government later, though not sooner than February 1, 2023.