The new guidance issued by the US Treasury Department adds more details to the complex system of the European Union, the G7 countries and Australia to collect the price of Russian oil from December 5.
Aimed to deprive Moscow of war profits from its oil, the tariff plan has for months left shipping service providers confused about what specific rules they will need to comply with to avoid sanctions.
New guidance from the US Treasury Department’s Office of Foreign Assets Control (OFAC) answers several key questions, including when the restrictions will go into effect and what types of situations and companies will be bound by them.
Importantly, however, the guidance does not say what the price will be, something that the United States continues to speed up with its partners. However, the guidance makes 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.
Here are the key points from the latest guide:
Start and stop
“While shipping and insurance are covered services, these costs are different from the price of Russian oil,” the guidance said.
Oil cargoes loaded before 12:01 am EST (0501 GMT) on December 5, and stopped before January 12, will not be covered by the pricing policy, OFAC said. This gives good time for goods bought above average before December 5th to reach their destination on long sea voyages.
Any oil purchased or installed after those times, however, will need to be priced accordingly.
In addition, the price applies only to the first sale “settled” outside of Russia, which means the first point when the goods reach the shore. If oil is resold in the world after that point, it can be sold above the cap.
The directive makes it clear, however, that if the cargo returns to the sea without major conversion on shore outside of Russia – such as oil refining – it returns below the price.
Oil certified as originating in another country but transiting and dumped from Russia will not be covered by the cap, OFAC said, citing shipments of Kazakh oil out of the Caspian Pipeline Consortium (CPC) Black Sea terminal.
Imports from Russia are still banned in the US
The new guidelines will not allow US companies to import Russian oil, OFAC said, stressing that the US ban imposed in March after Russia’s invasion of Ukraine remains in effect.
But the guidance indicated that firms trading in the US can engage in sales in other jurisdictions as long as they comply with pricing regulations.
In a move that may also comfort some players in the global transportation industry, the directive also revealed what types of companies will be forced to participate in the cap system. It includes commercial and commodity brokers, and companies involved in financing, shipping, insurance, flagging, and commodity trading.
Some important stakeholders will not be covered by this policy, such as those who only provide insurance for crew members and their medical care, or inspections and inspections of oil tankers.
Shippers were concerned that pilots would face restrictions, which could increase the likelihood of accidents on the treacherous waterways.