ITIC circular: Sanctions against Russia - The upcoming oil price caps on 5 December 2022
Date: 2nd December 2022
On 6 October 2022, the EU further amended its Russian sanctions legislation to pave the way for its coming price cap on Russian oil and petroleum products. The most important changes for ITIC’s members in this eighth round of sanctions were to Council Regulation 833/2014, a consolidated version of which is available here.
The Total Import Ban
The EU’s amendments to the Regulation have not changed the upcoming total ban on the purchase, import or transfer into the EU of crude oil and petroleum products originating or exported from Russia. The ban on crude oil imports will be effective from 5 December 2022. The ban on petroleum products imports will be effective from 5 February 2023. The brokerage and insurance of such imports will be banned from the same dates.
Members should carefully note these deadlines and ensure they are not involved in any transport to which these provisions apply, otherwise Members will likely be in breach of sanctions.
The amendments to the Regulation have clarified that EU insurers are permitted to pay claims after those deadlines if both the transport and the insurance coverage were sanctions compliant and had ceased by the relevant date. Of course, this is not a guarantee of ITIC cover in each individual case, which will turn on its facts.
The amendments to the Regulation confirm that it will continue to be permitted to transport crude oil and petroleum products that originate in a third country and are only being loaded in, departing from or transiting through Russia, provided that both the origin and the owner of those goods are non-Russian.
The Price Cap
The coming EU price caps will apply to the transport to third countries of crude oil and petroleum products that either originate in Russia or are exported from Russia. All such transport, as well as management, agency, and brokerage services in respect of such transport, will be prohibited unless the purchase price per barrel of the cargo is within the price cap. The crude oil price cap will apply from 5 December 2022 and the petroleum products price cap will apply from 5 February 2023.
The levels of the price caps are yet to be announced and look set to vary from time to time (at the time of writing, discussions of an EU price cap of US$ 60 a barrel for Russian crude oil were being reported). Once the first price caps are announced, each time they are varied, a grace period of 90 days are meant to apply to transports that (a) are based on a contract concluded before the latest price cap change, and (b) were within the price cap applicable at the time the relevant contract was made.
Similar legislation has been introduced by the UK, providing for the issuing and use of a “General Licence” in order to benefit from the price cap exception, and bringing forward the date of the UK’s oil import ban from the end of December to 5 December 2022 (see the UK Government press release here).
The Treasury Department has similarly issued guidance on 22 November 2022 about its policies on the transport of Russian oil and implementation of a price cap in early December.
These can be found here: Guidance on Implementation of the Price Cap Policy for Crude Oil of Russian Federation Origin; Publication of Russia-related Determination; Issuance of Russia-related General Licenses | U.S. Department of the Treasury
If ITIC members become aware, or have concerns, that their clients and/or parties in a transaction have become a sanctioned entity, or are concerned as to whether the sanctions regimes apply to any of their transactions, they should contact specialist sanctions lawyers as soon as possible. There is a dedicated Russia-Ukraine conflict page on the ITIC website, where you can find further circulars and podcasts on the topic.
Please note that the sanctions landscape changes continually. This guidance is based on the sanctions in force at the date of publishing only. It identifies only some of the key prohibitions and does not constitute legal advice. It is provided for general information purposes only and should not be understood as guidance on any particular claim or trade, or an assurance that ITIC will cover any particular claim. Whilst we have taken reasonable care to ensure the information in this circular is correct on the date of publication, it is provided without any guarantee or warranty as to its accuracy.