Sanctions on Services Involving the Shipping of Russian Oil: Summary of Preliminary US Guidance and Next Steps

Following Russia’s unprovoked invasion of Ukraine in February 2022, the United States imposed several measures against Russian petroleum products in an effort to reduce the flow of oil revenues to Russia while combating rising energy prices around the world. The US Treasury Department’s Office of Foreign Assets Control (OFAC) previously banned the import of Russian oil into the United States and barred investment in Russia’s energy sector. On September 2, 2022, the United States, along with other G7 members – Canada, the European Union, France, Germany, Italy, Japan and the United Kingdom – officially announced a plan to cap the price of Russian crude oil and petroleum products. . According to this plan, the provision of services supporting the maritime transport of Russian oil and related products (“Russian oil transported by sea”) will only be allowed when these products are sold at or below the ceiling price. According to the statement by G7 finance ministers, the price cap should reinforce and amplify the reach of existing sanctions coordinated among Western allies, including, notably, the June 2022 European Union (EU) ban on provide or finance the maritime transport of crude oil or petroleum products from Russia to third countries.

On September 9, 2022, OFAC issued “Preliminary Guidance on Implementing a Maritime Services Policy and Related Price Exception for Russian Oil Transported by Sea” (Preliminary Guidance). The preliminary guidance provides that the ban (the “maritime services policy”) will cover a wide range of (as yet undefined) services related to maritime transport and will come into force on December 5, 2022for the maritime transport of crude oil, and on February 23, 2023, for the maritime transport of petroleum products. The ceiling price for Russian oil transported by sea has not yet been established and will be set by consensus among the coalition of countries implementing the policy.

In the United States, the Marine Services Policy will be promulgated pursuant to Executive Order (EO) 14071, which authorizes the prohibition of certain services to the Russian Federation by United States nationals. It is important to note that the current US ban on importing Russian crude oil and petroleum products (at any price) under EO 14066 will remain in place. The Maritime Services Policy applies to the provision of services by US nationals related to the shipping of Russian oil by sea to countries other than the United States.

US Government Maritime Services Policy Details

US shipping policy will affect both buyers of Russian oil transported by sea and providers of shipping services. To qualify for marine services, buyers must provide documentation or otherwise certify to service providers that the oil to be transported was purchased at or below the ceiling price. Service providers must require these records or attestations before providing marine services for oil transported by Russia, and all parties must keep these records for five years.

According to the preliminary guidelines, service providers who inadvertently trade Russian oil transported by sea purchased above the ceiling price will not be liable for violations of sanctions resulting from bad faith or misrepresentation by buyers, in accordance with the “safe harbor” provided by the record keeping and attestation process. . (The preliminary guidance provides additional details regarding the type of information that service providers should request from those requesting their services, depending on the level of price information available to them in the normal course of business.)

Finally, in addition to the sanctions liability of service providers, buyers of Russian oil transported by sea are subject to sanctions enforcement action by OFAC if they (a) make large purchases above ceiling price and knowingly rely on service providers subject to the Marine Services Policy or (2) knowingly provide false information to service providers.

Examples of Transactions Allowed or Prohibited Under the Marine Services Policy

OFAC’s draft guidance offers examples of permitted versus prohibited transactions under the Marine Services Policy:

  • Permit
    • A commodity broker/trader who trades Russian oil transported by sea certifies compliance with the price cap and provides a contract to a financial institution, which keeps the documentation for five years. The financial institution performs its own due diligence to determine whether the oil was purchased at or below the ceiling price and provides financing to the customer for the transaction.
  • Prohibited
    • A refiner purchases Russian oil transported by sea below the ceiling price from a Russian oil exporter and transmits the relevant documentation; the refiner separately agrees to return the profits to the exporter, thus raising the price above the ceiling price. The refiner is subject to the application of sanctions.
    • A commodity broker/trader buys Russian oil transported by sea above the ceiling price, but falsifies the documents given to the service providers. The broker/dealer is subject to the application of sanctions.

Other upcoming OFAC sanctions evasion guidance

The preliminary guidelines state that U.S. Persons will be required to reject and report transactions intended to evade or violate Maritime Services policy. OFAC plans to issue both additional guidance on identifying transactions to evade the price cap on Russian oil transported by sea and best practices for mitigating the risk of sanctions violations. OFAC already notes that possible red flags for evading Marine Services policy include (i) evidence of deceptive shipping practices or manipulated shipping documents; (ii) the customer’s reluctance or refusal to provide pricing information; (iii) atypical transaction conditions such as exceptionally favorable prices, inflated costs or devious payment mechanisms; (iv) newly formed counterparties; and (v) abnormal shipping routes.

Existing measures adopted by G7 members

The EU has already adopted restrictions on the provision of technical assistance, financial assistance and brokerage services (including insurance) related to maritime transport to third countries of crude oil or petroleum products originating in or exported from Russia. There is a six-month liquidation period for contracts signed before June 4, 2022, i.e. until December 5, 2022. The purchase, import or transfer into the EU of crude oil and petroleum products originating in or exported from, Russia is also restricted.

The United Kingdom has imposed a blanket import ban on petroleum and petroleum products shipped from Russia when such imports are made on or after December 31, 2022. ethyl alcohol) and 3826 (biodiesel oil and certain mixtures thereof). The prohibition also covers the acquisition of petroleum and petroleum products originating in or located in Russia with the intention that such goods enter the United Kingdom, the supply or delivery of petroleum and petroleum products from Russia to the United Kingdom Uni, and related services such as technical assistance, financial services and brokerage.

Next steps

The US maritime services policy – combining sanctions on the services sector with a price cap – is unprecedented in the application of US sanctions, and so we expect many questions to arise as the OFAC continues to provide guidance regarding administration and enforcement. We anticipate that similar questions will arise when other G7 members provide details of their plans to implement the price cap on Russian oil transported by sea.

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