On November 21, 2022, the Department of the Treasury issued a Determination pursuant to Executive Order 14071 (prohibiting new investment in and the provision of certain services to the Russian Federation, see Update of April 7, 2022), that prohibits the following categories of services related to the maritime transport of crude oil of Russian Federation origin: (i) trading/commodities brokering; (ii) financing; (iii) shipping; (iv) insurance, including reinsurance and protection and indemnity; (v) flagging; and (vi) customs brokering. As a result, the following activities are prohibited, unless licensed or authorized by the Office of Foreign Assets Control (OFAC): “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any of the Covered Services to any person located in the Russian Federation.” The prohibition on providing these services will be effective as of December 5, 2022.
Notwithstanding the prohibitions covered by this Determination, these services are authorized “when the price of the crude oil of Russian Federation origin does not exceed the relevant price cap” that has been established by the “Price Cap Coalition” (the United States, G7 members, the European Union, and Australia – countries that have agreed to prohibit the import of crude oil and petroleum products of Russian origin). OFAC has also published guidance on the implementation of the price cap policy for crude oil of Russian Federation origin. This guidance indicates that the price cap for Russian oil will be set after a technical exercise conducted by the Price Cap Coalition. The guidance provides information on how to apply the price cap to determine if a transaction is permissible, offers a more robust description of the covered categories of services enumerated above, and describes the steps for establishing a “safe harbor” from OFAC enforcement and penalties for U.S. companies that operate in good faith with the required due diligence, recordkeeping and attestation process to confirm that Russian oil has been bought at or below the established price cap.
With the issuance of this Determination, OFAC has also issued the following Russia-related General Licenses (GL) to authorize certain activities which would otherwise be prohibited:
- GL 55 – Authorizing certain services related to Sakhalin-2 until September 30, 2023 involving the maritime transport of crude oil originating from this oil and gas development in Sakhalin Island, Russia.
- GL 56 – Authorizing certain services with respect to the European Union to allow the importation of crude oil into the Republic of Bulgaria, the Republic of Croatia, or landlocked European Union Member States.
- GL 57 – Authorizing certain services related to vessel emergencies to allow transactions that are ordinarily incident and necessary to addressing vessel emergencies related to the health or safety of the crew or environmental protection, including safe docking or anchoring, emergency repairs, or salvage operations. This GL does not authorize transactions related to offloading Russian crude oil, unless necessary to address a vessel emergency, nor does it authorize transactions related to the sale of such crude oil.