On December 2, 2022, the G7 and Australia, as current members of the “Price Cap Coalition,” announced that the coalition agreed upon a maximum price of 60 US dollars per barrel for seaborne Russian crude oil, delivering on a commitment by G7 Leaders to prevent Russia from profiting from its war in Ukraine. The G7 and Australia also report that the price level of the cap was unanimously endorsed by all EU Member States. In addition to deterring Russia’s ability to profit from the war, the coalition reports that the price cap will help to stabilize global energy markets and will minimize the negative economic effects of the war that have disproportionately impacted low- and middle-income countries. These goals will be achieved by prohibiting coalition members from providing certain services, including maritime insurance and trade financing, to third-country importers that purchase Russian oil above the maximum price of $60 per barrel.
The coalition reports that the oil price cap is effective across coalition jurisdictions on December 5, 2022 or very soon thereafter and is expected to include a temporary exception for transactions involving Russian oil that was loaded onto vessels prior to December 5, 2022. The coalition also noted that, on February 5, 2022, the price cap would be expanded to Russian-origin petroleum products, which is expected to provide separate maximum prices for high-value and low-value refined products. In an effort to harmonize the price cap’s implementation across jurisdictions, each coalition member is expected to publish price cap guidance within their jurisdictions. The coalition will also give additional consideration to any measures that may be necessary to prevent the possible evasion and circumvention of price cap service prohibitions.
Also on December 2, 2022, US Secretary of the Treasury Janet Yellen issued a separate statement announcing the joint price cap on seaborne Russian oil, which she described as the “culmination of months of effort” and hard work by coalition partners. Yellen also signed the Determination Pursuant to Section 1(a)(ii), 1(b), and 5 of EO 14071 to reflect the $60 per barrel cap on Russian crude oil, effective December 5, 2022. The US also published a Fact Sheet that provides an overview on the price cap of Russian oil. Yellen previously signed the Determination Pursuant to Section 1(a)(ii) of EO 14071 on November 21, 2022, which prohibits certain services related to the maritime shipment of Russian oil. On November 22, 2022, the Office of Foreign Assets Control also issued guidance on the implementation of its oil price cap policy as well as three general licenses authorizing certain services involving oil from the Sakhalin-2 project (GL 55), oil imported into the EU (GL 56), and services related to vessel emergencies (GL 57).
On the same day, the UK announced that it will enforce the price cap on Russian oil starting on December 5, 2022. The UK also emphasized that one of the key services prohibited by the price cap is insurance, noting that the UK is a global leader in the provision of protection and indemnity insurance which relates to third-party liability claims. On November 14, 2022, the UK published guidance regarding the service prohibitions related to the price cap on Russian oil and updated its guidance on December 4, 2022. The Office of Financial Sanctions Implementation also issued four general licenses authorizing certain services related to the $60 per barrel oil price cap (GL INT/2022/2469656); the winddown of services related to Russian oil purchased or loaded for shipment prior to December 5, 2022 (GL INT/2022/2470256); Oil Price Cap-related correspondent banking and payment processing (GL INT/2022/2470056); and certain transactions related to exempt projects and countries, including the Sakhalin-2 project (GL INT/2022/2470156).