Agreement on price cap on Russian crude oil
Today, the fifth of December 2022, the G7 price cap policy for Russian crude oil takes effect. The price cap has been set to 60 dollars per barrel.
As of today, the so-called Price Cap Coalition of the G7 countries, the European Union and Australia, prohibit certain services that enable maritime transportation of Russian-origin crude oil. The same prohibition will take effect for Russian-origin petroleum products on 5 February 2023. However, the provision of such services will be allowed, provided the products in question are purchased at or below a price, as determined by the Price Cap Coalition. The price cap exemption is intended to mitigate adverse consequences on energy supply to third countries and reduce price surges driven by extraordinary market conditions, while still limiting Russian oil revenues. (For further information, see our previous WR Sanctions Alert from 10 October 2022 and WR Sanctions Alert from 24 November 2022).
On Friday, 2 December 2022, the members of the Price Cap Coalition issued a statement, saying that a consensus had been reached, setting the price cap for Russian-origin crude oil at 60 dollars per barrel, in line with unanimous decision by EU member states endorsing a price level for the price cap. The price cap for petroleum products will be set in due course.
For the EU, the final steps of the implementation of the price cap exemption was done by way of Council Regulation (EU) 2022/2367, Council Decision (CFSP) 2022/2369, and Commission Implementing Regulation (EU) 2022/2368 - all adopted 3 December 2022. Note that the new Article 3n, Paragraph 6d of Council Regulation (EU) 833/2014 (a consolidated version has not yet been published) provides for a wind-down period applying to crude oil loaded before 5 December 2022 and unloaded at the final port of destination prior to 19 January 2023. Further information can be found in this press release from the EU Commission. The EU also published an FAQ regarding the price cap on 3 December available here.
On 4 December, the UK published, amongst other things, a General License which establishes the price cap in UK law, a General License which establishes a wind-down period corresponding to the EU's wind-down period described above, and an updated guidance on the Russian oil services ban. These materials can all be found on this OFSI landing page for the Russian oil services ban.
As for the US, the Office of Foreign Assets Control (OFAC) issued a determination setting the price cap at 60 dollars per barrel earlier today. OFAC's determination of 22 November 2022 has already provided for a wind-down corresponding to the EU's and UK's as set out above. We describe the US implementation of the price cap exemption in this previous WR Sanctions Alert from 24 November 2022, and a press release from OFAC can be found at this link.
WR Sanctions Alerts provide you with updates on material developments in the country-specific sanctions programmes implemented by the US, the UN, the UK, the EU and Norway. We will not provide updates on mere prolongations, without material changes, of existing sanctions programmes, nor on any listings or de-listings of individuals/entities placed on implemented sanctions lists . Please note that the WR Sanctions Alerts are provided as general information and do not constitute legal advice.