Updates Related to Price Cap on Russian Oil
Release date
09/02/2022
On September 2, 2022, G7 Finance Ministers issued a statement confirming their joint intention to implement a price cap with respect to Russian-origin crude oil and petroleum products. As described in the G7 statement, the G7 countries, along with other allies and partners, plan to prohibit the provision of services that enable maritime transportation of such oil and products unless purchased at or below a price level determined by the coalition of countries adhering to and implementing the price cap.
Today, Secretary of the Treasury Janet L. Yellen also issued a separate statement on the price cap policy. In addition, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) anticipates publishing preliminary guidance on the implementation of the price cap in September. The preliminary guidance will provide a high-level overview of this mechanism, including how U.S. persons can comply, in advance of formal guidance and legal implementation to be issued at a later date.
[9-9-22 update: see Preliminary Guidance on Implementation of a Maritime Services Policy and Related Price Exception for Seaborne Russian Oil]
---[Pre-update notes]---
1) This is an unusual announcement, by OFAC, of sanctions to be imposed ahead of the date of their actual imposition. Normally OFAC does not telegraph the sanctions it imposes, but in this case the imposition of the "price cap" was the result of an agreement with other allied counties that was to be made public anyway.
2) It's not entirely clear what this "price cap" will entail. The OFAC notice says it will "prohibit the provision of services that enable maritime transportation of such oil and products unless purchased at or below a price level determined by the coalition of countries adhering to and implementing the price cap." This appears to be a relatively limited primary sanctions prohibition, most likely to come in the form of a determination made pursuant to EO 14071, than a secondary sanctions provision that would result in the imposition of sanctions on non-U.S. persons purchasing Russian oil at a price below the cap.