On October 12, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two entities and identified as blocked property two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap. See here for additional identifying information on these entities.
The United States is part of an international coalition including the G7, the European Union and Australia (the Price Cap Coalition) that have agreed to prohibit the import of crude oil and petroleum products of Russian Federation origin. These countries also agreed to restrict a broad range of services related to the maritime transport of crude oil and petroleum products of Russian Federation origin—unless that oil is bought and sold at or below the specific price caps established by the Coalition. The crude oil price cap took effect in December 2022 with a cap on Russian crude oil at $60 per barrel. For additional information on this Russian oil price cap, see Updates of September 6, 2022, November 29, 2022, December 5, 2022, and February 8, 2023.
As a result of these sanctions, all property and interests in property of the persons placed on OFAC’s SDN List that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.
OFAC did issue Russia-related General License (GL) 73 that authorizes limited safety and environmental transactions involving the two sanctioned vessels. Application of the GL is limited and should be reviewed carefully as the GL continues to prohibit certain activities.
In addition, the Price Cap Coalition released a statement and an advisory to provide recommendations concerning specific best practices in the maritime oil industry. The advisory reflects “efforts to promote responsible practices in the industry to prevent and disrupt sanctioned trade, and enhance compliance with the price caps on crude oil and petroleum products of Russian Federation origin.” The advisory notes that a loss of transparency and “shadow” trade in oil has become more pronounced and identifies certain heightened risks. It then recommends the following best practices:
- Require appropriately capitalized P&I insurance.
- Receive classification from an International Association of Classification Societies member society.
- Best-practice use of Automatic Identification Systems (AIS).
- Monitor high-risk ship-to-ship transfers.
- Request associated shipping and ancillary costs.
- Undertake appropriate due diligence.
- Report ships that trigger concerns.
By adopting these recommendations, the advisory notes that “industry stakeholders can reduce their exposure to possible risks associated with recent developments in the maritime oil trade.”