[co-author: Andrea Fraser-Reid, and Cassady Cohick]
On 2 December 2022, the US Department of the Treasury issued a press release announcing a $60/barrel price cap that will apply to the prohibition on US persons from engaging in a broad range of services related to the maritime transportation of Russian Federation origin crude oil. These prohibitions went into effect on 12:01 am EST 5 December 2022, pursuant to US Department of the Treasury's Office of Foreign Assets Control’s 22 November 2022 “Determination pursuant to Executive Order (E.O.) 14071 to implement the price cap policy for crude oil of Russian Federation origin” and 5 December Determination Pursuant to Sections 1(a)(ii), 1(b) and 5 of EO 14071, which officially set the price cap on crude oil of Russian Federation origin as $60/barrel.
OFAC Guidance
On 22 November 2022 the US Department of the Treasury's Office of Foreign Assets Control (OFAC) released guidance in preparation for the implementation of the 2 December Determination and Russian crude oil price cap, “OFAC Guidance on Implementation of the Price Cap Policy for Crude Oil of Russian Federation Origin”. (Please see our prior alert on this Determination for further guidance on these prohibitions). The Guidance states that the precise value of the price cap is subject to change, but if this occurs, OFAC intends to authorize a period for covered services providers to complete the provision of services engaged for the maritime transport of Russian oil purchased in accordance with the previous price cap. The Guidance also establishes a recordkeeping and attestation “safe harbor” by which different types of tiers of actors active in maritime services can demonstrate or confirm that the Russian oil has been purchased at or below the price cap.
Price Cap Coalition
These measures were taken in coordination with the Price Cap Coalition (collectively the G7, the EU, and Australia), and only affect services related to the maritime transport of Russian crude oil. OFAC has advised it intends to publish preliminary guidance on implementation of the price cap policy for other petroleum products of Russian Federation origin in the near future. We note that, per OFAC’s Preliminary Guidance on Implementation of a Maritime Services Policy and Related Price Exception for Seaborne Russian Oil”, the date upon which the price cap with respect to the maritime transport of other petroleum products takes effect is 5 February 2023.
Next steps
Service providers should have a thorough recordkeeping and attestation process to take advantage of the safe harbor process within the price cap policy.
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