04/30/2024

The Price Cap on Russian Oil – Part 1: Increased OFAC Enforcement

The National Law Review

In June 2022, the Group of Seven (“G7”) countries—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—decided to pursue a policy to cap the price of Russian oil. In December 2022, the G7 countries, joined by Australia and the supranational European Union (together, the “Price Cap Coalition”) officially implemented measures to ban a range of services related to the maritime transport of Russian-origin crude oil wherever the price being paid for that oil was above a capped threshold. The intent of the price cap was to keep Russian oil flowing to world markets, since it is vital to the global economy, while simultaneously reducing the revenues going to Russia and, therefore, Russia’s ability to sustain its actions in Ukraine. The Price Cap Coalition implemented similar measures for petroleum products in February 2023.

Over the past year, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has ramped up its enforcement of the price cap by sending information requests to marine industry actors and imposing sanctions on entities implicated in transporting Russian crude oil being sold above the price cap. The Price Cap Coalition has expressly supported OFAC’s actions, including in an October 2023 statement noting that “Russian oil tax revenue was down 45%” and confirming the focus “on supporting compliance and enforcement.”[1]

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