US offers new details on plan to cap Russian oil prices – EURACTIV.com

The new guidance issued by the US Treasury adds more details to a complex plan by the European Union, the G7 nations and Australia to limit the price of Russian oil starting on December 5.

Aimed at depriving Moscow of a wartime profit margin on its oil, the price-fixing plan has for months left shipping service providers confused about the specific rules they must follow to avoid sanctions.

New guidance from the US Treasury Department’s Office of Foreign Assets Control (OFAC) answers a few key questions, including when the restrictions will go into effect and what types of scenarios and companies they will be bound by them.

Crucially, however, the guide did not yet say what the price will be, something that the United States has always shied away from with its partners. However, the guide made it clear that the cap will be on a free-on-board (FOB) basis, meaning that shipping, handling, customs and insurance costs are not included.

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Here are the key points from the latest guide:

Start and stop

“While transport and insurance are covered services, these costs are distinct from the price of Russian oil,” said the guide.

Oil cargoes loaded before 12:01 a.m. EST (0501 GMT) on Dec. 5, and docked before Jan. 12, will not be covered by the price policy, OFAC said. This provides a grace period for cargo purchased above the cap before December 5 to reach their destinations on often long sea journeys.

Any oil purchased or docked after those times, however, will need to adhere to the price tag.

In addition, the pricing applies only to the first sale “landed” outside Russia, that is, the first point at which the cargo comes ashore. If the oil is sold on the ground after that point, it can be sold above the cap.

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The guide makes it clear, however, that if the cargo returns to sea without having been substantially transformed on land outside of Russia – such as having been refined into fuel – it returns below the price.

Oil certified as originating in another country but transiting and offloading from Russia will not be covered by the cap, OFAC said, citing Kazakh oil exports via the Caspian Black Sea terminal Pipeline Consortium (CPC).

Russian imports are still banned in the United States

The new guidance will not allow US companies to import Russian oil, OFAC said, emphasizing that a US ban imposed in March after Russia’s invasion of Ukraine remains in effect.

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But the guidance indicated that US trading companies can be involved in sales to other destinations, as long as they comply with the price rules.

In a move that could also comfort some players in the global transportation industry, the guidance also outlined which types of companies would be required to participate in the stoppage plan. They include trade and commodity brokers, and companies involved in financing, shipping, insurance, marking and customs brokerage.

The most tangential participants will not be covered by the policy, such as those who only provide insurance for crew members and their medical assistance, or the inspection and pilotage of oil tankers.

Shippers were concerned that pilots would be covered by the restrictions, which could increase the chances of accidents in difficult waterways.



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