December 26, 2023

OFAC tightens price cap policy restrictions by updating guidance and imposing additional sanctions

On December 20, 2023, the US Department of the Treasury’s Office of Foreign Assets Control announced that it tightened its enforcement of the price cap on Russian oil by designating United Arab Emirates-based SUN Ship Management D Ltd. (“SUN Ship”), the ship manager that manages vessels owned by Joint Stock Company Sovcomflot, an entity owned by the Government of Russia.  According to OFAC, JSC Sovcomflot, which was previously designated by EU and UK authorities, is subject to restrictions in the United States under Directive 3 of Executive Order 14024.  OFAC also designated several obscure oil traders who have frequently participated in the seaborne transportation of Russian-origin oil since the price cap was imposed, including Hong Kong-based Bellatrix Energy Limited whose vessels have reportedly made more than 150 port calls in Russia since June 2023.

These designations were made by OFAC pursuant to EO 14024 for either being a company owned or controlled by the Government of Russia or one that operates in the marine sector of the Russian economy.  As a result of these sanctions, all property and interests in property of the designated persons within the United States or within the possession or control of a US person are blocked, and US persons are generally prohibited from engaging in transactions involving a designated person.  Entities owned 50 percent or more by one or more blocked persons are also blocked.

On December 20, 2023, in coordination with the Price Cap Coalition, OFAC joined the UK Office of Financial Sanctions Implementation to issue updated industry guidance on the implementation of price cap policy.  In light on the new designations, OFAC also issued General License 81 and 82 pursuant to Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”), 31 CFR part 587.  General License 81 authorizes certain safety and environmental transactions involving the persons or vessels blocked on December 20, 2023, while General License 82 authorizes certain wind down transactions with SUN Ship, in particular.  The transactions covered by both general licenses are authorized until March 19, 2024, provided that any payment to a blocked person is made into a blocked account in accordance with the RuHSR.

Department of Treasury Press Release | OFAC – Updated Guidance | OFSI – Updated Guidance | General License 81 | General License 82