On December 30, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued “Preliminary Guidance on Implementation of the Price Cap Policy for Petroleum Products of Russian origin” to explain how OFAC will implement a ban on the provision of services related to the maritime transportation of Russian-origin petroleum products (“Petroleum Products Guidance”). The petroleum products ban builds on a similar ban related to maritime transportation of Russian-origin crude oil that was implemented last year.
Price Cap Policy Background
The US Government is part of an international coalition, including the G7, the European Union, and Australia, that has agreed to implement a policy to maintain the supply of Russian-origin crude oil and petroleum products to global markets while reducing revenues for Russia. This policy is known as the “price cap policy.”
In September 2022, OFAC first issued preliminary guidance related to the implementation of the policy banning the provision of services related to the maritime transportation of Russian crude oil. Our blog post discussing this preliminary guidance is available here.
In November 2022, OFAC published a determination pursuant to Executive Order 14071 (“EO 14071”) “Determination Pursuant to Section 1 (a)(ii) of EO 14071” implementing the price cap policy for Russian crude oil as discussed in that September 2022 preliminary guidance. Our blog post on this determination is available here.
Then, in December 2022, OFAC implemented a price cap on Russian crude oil at 60 USD per barrel, in conjunction with other G7 countries. Our blog post regarding this crude oil price cap is available here.
Preliminary Guidance on the Price Cap Policy for Petroleum Products
On December 30, 2022, OFAC followed suit and issued “Preliminary Guidance on Implementation of the Price Cap Policy for Petroleum Products of Russian origin” (“Petroleum Products Guidance”), banning the provision of services related to the maritime transportation of Russian-origin petroleum products. This ban will come into effect on February 5, 2023.
As described in the Petroleum Products Guidance, the Secretary of the Treasury will implement the price cap policy for Russian petroleum products by issuing a determination pursuant to EO 14071, as it did to implement the price cap policy for Russian crude oil. OFAC stated that US persons should refer to the guidance document “OFAC Guidance on Implementation of the Price Cap Policy for Crude Oil of Russian origin” for any issue not specifically addressed in the Petroleum Products Guidance, because OFAC expects to take a similar approach for Russian petroleum products as it has done for Russian crude oil.
OFAC anticipates publishing final, combined guidance for both Russian oil and Russian petroleum products prior to February 5. The anticipated petroleum products determination, which will cover the same categories of services (the “Covered Services”) as the crude oil determination, will take effect on that date. As with the crude oil determination, OFAC anticipates issuing a separate determination to set the price caps for Russian petroleum products. OFAC anticipates amending General License Nos. 56 and 57 to extend these authorizations to the petroleum products determination.