On February 3, 2023, US Secretary of the Treasury Janet Yellen released a statement announcing that the G7 Price Cap Coalition had jointly agreed to set caps on the price of seaborne Russian refined oil products, building upon the price cap on Russian crude oil that was set in December 2022. The price caps were established to limit oil and petroleum revenues used by Russia to fund its war against Ukraine. Yellen reports that senior Russian officials have noticed changes in their revenues since the crude oil price cap was implemented, while global energy markets have remained well-supplied and low-and medium-income countries have been shielded from high energy costs as a result of the price cap.
To implement the price cap policy on petroleum products, OFAC published a determination pursuant to section 1(a)(ii), 1(b), and 5 of Executive Order 14071, which reflects a price cap of $45 per barrel for Russian-origin Discount to Crude petroleum products and a price cap of $100 per barrel for Premium to Crude petroleum products, effective February 5, 2023. OFAC also published a determination pursuant to section 1(a) (ii) of EO 14071, which prohibits certain services related to the maritime transport of Russian-origin petroleum products for prices that exceed the price cap. This determination also excludes services associated with Russian-origin products loaded onto vessels before February 5, 2023 and unloaded at the port of destination before April 1, 2023. OFAC also published guidance that provides a general overview of the price cap policy for Russian-origin crude oil and petroleum products.
OFAC also issued Russia-related General License 56A to authorize the importation of Russian-origin petroleum products into the Bulgaria, Croatia or other landlocked EU member states described in Council Regulation (EU) 2022/879 of June 3, 2022. GL 56A replaces and supersedes GL 56 in its entirety. OFAC also issued General License 57A to authorize certain services for vessel emergencies related to the health or safety of the crew or environmental protection. GL 57A replaces and supersedes GL 57 in its entirety.
On February 3, 2023, the UK government also announced that it set caps on the price of seaborne Russian oil products. The UK reports that, from February 5, 2023, high-value petroleum products such as diesel and gasoline will be capped at $100 per barrel and lower-value products such as fuel oil will be capped at $45. The UK also announced that it has worked closely with industry and US partners to lead design of the caps given the UK’s major role in servicing maritime trade as a global leader in the provision of protection and indemnity (“P&I”) insurance associated with third-party liability claims. The UK reports that it is responsible for 60 percent of the global cover provided by the International Group of the P&I clubs.
To implement the new policy, the UK Office of Financial Sanctions Implementation published industry guidance on the price caps for Russian petroleum products. OFSI also provided a list of premium-crude products in the industry guidance and in updates to General License INT/2022/2469656. In addition, OFSI issued General License INT/2023/2660772 which authorizes wind down transactions associated with Russian-origin refined oil products traded above the price cap that are loaded onto vessels before February 5, 2023 or offloaded in a third country prior to April 1, 2023. Subject to certain exclusions and conditions, GL INT/2023/2660772 also authorizes the maritime delivery of Russian oil products from Russia to a third country or from one third country to another.
On February 4, 2023, the Council of the EU also agreed upon the level of the two price caps set for Russian-origin petroleum products, in close cooperation with the Price Cap Coalition. Similar to the US and UK, the Council will authorize a 55 day transitional period to enable vessels to carry Russian petroleum products priced over the price cap if they were purchased or loaded on to vessels before February 5, 2023 and unloaded prior to April 1, 2023. The Council also announced that it will monitor the price cap mechanism for crude oil, with plans to review the caps in mid-March and then every two months thereafter.