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Sanctions: Russian oil price cap
The club, along with all other IG clubs has published a comprehensive Circular on the features and operation of the EU/G7 Price Cap on Russian crude oil, which came into force on 5 December 2022. A copy of the Circular can be...
The club, along with all other IG clubs has published a comprehensive Circular on the features and operation of the EU/G7 Price Cap on Russian crude oil, which came into force on 5 December 2022. A copy of the Circular can be accessed here. A separate price cap will be introduced in respect of Russian petroleum products which will come into effect from 5 Feb 2023.
The Price Cap scheme prohibits transportation by sea and the provision of services (including P&I insurance) that enable the transportation of Russian crude oil unless it has been sold at or below the Price Cap. The prohibition on services extends to shipments by or to third countries that are not part of the EU/G7 coalition. The main issues to note:
- The price cap has initially been set at US$60 per barrel.
- Participants in the scheme are grouped in Tiers. Those with knowledge of the price (such as commodity traders and brokers and others involved directly in a sale contract) are typically Tier 1 and are required to obtain and share evidence that the cargo complies with the Price Cap. P&I Clubs and other insurers are typically in Tier 3 and are required to obtain attestation of compliance from their counterparties. A sample form of stand-alone attestation is provided at Annex II of the Circular, also linked below. Shipowners also fall under Tier 3 and must therefore obtain confirmation from their contractual counterpart (usually the charterer) that they will not purchase Russian oil above the Price Cap. This may be provided in contractual documents such as by way of a charter party exclusion of any Russian crude oil cargo sold above the Price Cap. If members have specific questions on this aspect, they should seek independent legal advice.
- There are due diligence and good faith requirements for participants in all three Tiers. These are set out in more detail in the Circular, along with specific reporting obligations in different circumstances. P&I Clubs, along with other providers of services and technical assistance are obliged to withdraw their services in the event they have reasonable grounds to suspect that the Price Cap has not been complied with. Record-keeping requirements differ slightly between the US, EU and UK but effectively records of Price Cap transactions must be retained for a period of five years.
- There is a ‘Wind down’ period expiring on 19 January 2023 for vessels carrying Russian oil loaded prior to 12:01 GMT 5 December 2022 and discharged prior to 05:01 GMT 19 January 2023. Members wishing to utilise this exception should provide the club with a Date Attestation as soon as possible which confirms that the cargo was fully loaded prior to 05:01 GMT 5 December 2022 and will be discharged prior to 05:01 GMT 19 January 2023. A form to record the relevant information is provided at Annex I of the Circular, also linked below. Once completed and signed, this should be sent to the club at the following email address: email@example.com.
If members have any queries regarding the above, please get in touch with your usual club contact.
Category: Ukraine / Russia