Global Jurisdictions Implement Russian Oil Ban and Price Cap Policy

Global Jurisdictions Implement Russian Oil Ban and Price Cap Policy

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New Compliance Expectations for Industries Involved in Global Oil Trade

Introduction

A ban on services related to the maritime transport of Russian-origin crude oil sold above a pre-determined price cap of $60 per barrel began on December 5, 2022, with a similar price cap ban related to other Russian-origin petroleum products expected to begin February 5, 2023, with a yet-to-be-determined price level. The United States, G7, the European Union and Australia (collectively, the Price Cap Coalition) established this extraordinary measure to limit global revenues flowing to the Russian Federation following Russia’s invasion of Ukraine in 2022, while still maintaining the Russian supply of oil to global markets.

The new price cap policy will create complex new sanctions compliance and recordkeeping obligations for global industries involved (directly or indirectly) in Russian energy trade, including the insurance, trade finance, banking, brokering, navigation, shipping and refinery industries. The price cap at $60 per barrel is below the Brent international index for crude oil, which has been trading at about $87 per barrel (though the price for Urals crude has been trading below $80 since early November). The Price Cap Coalition reportedly will review the price cap regularly, with the intent to keep the cap at least 5 percent below the market price.

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