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Russian oil price cap – petroleum products
News & Insights 10 February 2023
The International Group (IG) has issued an updated Circular regarding the Russian oil price cap imposed by the Price Cap Coalition (EU, G7 and Australia). On 9 December 2022 we published a Circular summarising the guidance issued by the US, EU and UK regarding the price cap imposed on Russian crude oil (CN code 2709 00) which came into effect on 5 December 2022. The IG has now published an updated Circular regarding the price caps imposed on Russian petroleum products (CN code 2710) which came into effect on 5 February 2023.
There are two price caps for petroleum products which originate in or are exported from Russia. The first price cap is for petroleum products traded at a discount to crude oil which is set at $45 per barrel, while the second price cap is for petroleum products traded at a premium to crude which is set at $100 per barrel. Further details are provided in the updated Circular which can be accessed here.
The Price Cap Coalition prohibits transportation by sea and the provision of related services (including P&I insurance) unless the petroleum products have been sold at or below the relevant price cap. The prohibition on services extends to shipments by or to third countries that are not part of the Price Cap Coalition.
We are able to provide P&I cover for shipments of Russian petroleum products to countries which are not part of the Price Cap Coalition provided that the price of the cargo from the time it is loaded on board until it has cleared customs at the port of destination is at or below the relevant price cap. Shipments of Russian oil and petroleum products to G7 countries, other EU states and Australia, along with insurance and other services in relation to such shipments, remain generally prohibited.
Any shipowner or charterer members that intend to transport Russian petroleum products after 5 February 2023, will need to provide the club with an Attestation that it will not for the duration of its period of insurance, carry Russian petroleum products which have been sold at a price that for the period it is on board exceeds the relevant price cap. The Attestation that clubs require is at Annex II to the updated Circular. Members will also need to obtain contractual Attestations from their contractual counter parties stating that for the relevant period the sale price of the cargo will not exceed the price cap.
Ships with Russian petroleum products on board on the 5 February 2023 may continue to lawfully perform the voyage, even if the cargo has been sold at a price above the relevant price cap, providing the cargo is off loaded by 1 April 2023. Shipowners and charterer members engaged in the carriage of Russian petroleum products that commenced prior to the 5 February 2023 which will be completed by 1 April 2023 are required to complete a separate Attestation, which can be found at Annex I to the updated Circular. Once completed and signed, this Attestation should be sent to the club at the following email address: firstname.lastname@example.org.
The guidance provided by the EU and UK authorities regarding vessels bunkering Russian origin petroleum products (which would fall under CN code 2710) is currently unclear. The IG is seeking clarification from the relevant regulatory bodies and guidance will be provided in due course.
We remind members that club cover for the carriage of Russian crude oil loaded after 5 December 2022 and petroleum products loaded after 5 February 2023 is dependent upon members complying in full with the requirements of the oil price cap scheme, which includes the provision of appropriate Attestations. We are required to withdraw cover where there are reasonable grounds to suspect that the cargo being carried has been purchased at a price which is higher than the relevant price cap.
If members have any queries regarding the above, please get in touch with your usual club contact.