US Issues New Russia Price Cap Compliance Rules, Sanctions

The oil shipping industry will soon be required to comply with new attestation and record-keeping rules as part of the global price cap on Russian oil, the Treasury Department said in an updated price cap guidance released Dec. 20. The agency also issued new sanctions against a Russian government-controlled ship manager and other traders who frequently transport Russian oil above the price cap.

The rules, effective Feb. 19 for U.S. service providers, will require global oil shippers, customs brokers, vessel agents, shipowners, financial institutions, insurers and others to obtain attestations that certify any Russian oil they lift or load was purchased at or below the $60 per barrel price cap. Some also will be required to collect and share itemized insurance and freight costs with any party further down the supply chain.

Members of the price cap coalition, including the Group of 7 nations, the EU and Australia, said the new requirements will help “disrupt circumvention” of the cap “by reducing opportunities for bad actors to use opaque shipping costs to disguise oil purchased above the cap.” The U.K. released similar guidance Dec. 19 and updated its price cap general license. The updates were released two days after the EU introduced new rules to better track sales of tankers that may be used to illegally transport Russian oil and to require member states to share information on potential price cap violations (see 2312180070).

Along with the new rules, the Office of Foreign Assets Control sanctioned United Arab Emirates-based SUN Ship Management D Ltd, owned by Russian state-controlled fleet operator Joint Stock Company Sovcomflot, for managing vessels that have violated the price cap. OFAC said SUN Ship manages the SCF Primorye, a vessel previously sanctioned by the U.S.

The agency also designated Hong Kong-based Bellatrix Energy Limited, which charters ships that have made more than 150 port calls in Russia since June and has traded tens of millions of tons of Russian crude oil since the country’s 2022 invasion of Ukraine. OFAC also sanctioned Hong Kong-based Covart Energy Limited and its Russia-flagged vessel Sanar 15 as well as UAE-based Voliton DMCC for trading Russian oil.

OFAC issued two general licenses to authorize certain transactions with the blocked companies and ships, including new General License 81, which authorizes certain environmental- and safety-related transactions with SUN Ship Management, Covart Energy, Voliton DMCC, Bellatrix Energy and any entity they own by 50% or more. General License 82 authorized certain wind-down transactions involving SUN Ship Management or any entity it owns by 50% or more through March 19.

The updated price cap rules set different requirements for Tier 1 (commodities brokers and oil traders), Tier 2 (financial institutions, vessel agents and customs brokers) and Tier 3 (insurers, protection and indemnity clubs, shipowners and flagging registries) service providers. All those providers must now obtain attestations from their counterparties that say any Russian oil being traded is in compliance with the price cap.

Certain tier 2 and 3 service providers, including ship agents, customs brokers, insurers and flagging registries, must obtain those attestations within 30 days of the lifting or loading of Russian oil or petroleum products. If their counterparty refuses to provide an attestation, Treasury said, it will provide those service providers safe harbor from U.S. sanctions penalties as long as they disclose the issue to OFAC and stop doing business with that party.

Service providers that ask for an attestation will "not face an OFAC enforcement action due to the counterparty’s refusal to provide the requested information,” Treasury said.

Other service providers, including traders, ship owners and insurers, should either collect or require their counterparties to collect an itemized record of certain “ancillary costs” associated with the shipment, such as freight and insurance charges. For certain shipments that are free-on-board, where the seller is responsible for the cost of the goods until they are on board a ship at the country of origin, shippers must keep an itemized record “for all known costs negotiated at the start of the trade transaction, port dues and services charges at the point of loading/export, and relevant insurance and freight costs,” Treasury said.

Insurers, meanwhile, should require their counterparties, including the ship owner or manager, to collect and share that itemized cost information, which “would be passed ‘up the chain’ to the insurer or P&I club from the shipowner’s Tier 1 counterparty.” Treasury said insurers and other Tier 3 service providers should specifically look to request itemized cost information if they become “suspicious about a possible violation in the course of their own due diligence.”

The guidance also said reinsurers can benefit from safe harbor through “sanctions exclusion clauses” in their policies or contracts. They can also use signed attestations.

Although the U.S. said it’s giving American service providers two months to comply with the new rules, the joint statement by the price cap coalition said individual members “will provide guidance to their service providers and relevant industry, as well as details on the transition period, in the coming weeks.”

Treasury Deputy Secretary Wally Adeyemo said anyone involved in the maritime transportation of Russian oil, “especially Tier 1 actors like traders,” must comply with the rules “or face the consequences.”