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OFAC Publishes Preliminary Guidance on Price Cap to be Placed on Russian Oil


On September 9, 2022, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published preliminary guidance on how the United States, in coordination with the other G7 members, will implement a price cap on services related to the maritime transportation of Russian-origin crude oil and petroleum products. OFAC’s preliminary guidance reflects the joint statement issued from the G7 Finance Ministers Meeting of September 2, 2022, which confirmed the coalition’s intention to implement a maritime services policy against Russia for its invasion of Ukraine (see Update of September 6, 2022).

OFAC anticipates that this price cap will be implemented by issuing a determination pursuant to Executive Order 14071 (“Prohibiting New Investment In And Certain Services To The Russian Federation in Response to Continued Russian Federation Aggression”), which will (i) permit the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of services related to the maritime transportation of seaborne Russian oil, if the seaborne Russian oil is purchased at or below the price cap and (ii) prohibit such services if the seaborne Russian oil is purchased above the price cap.   In essence, the framework will be implemented as a ban, from which there will be an exception for services related to Russian seaborne oil purchased at or below the cap. The price cap will not undo the prohibition on the importation of Russian oil into the United States that  went into effect pursuant to Executive Order 14066 (see Update of March 9, 2022).  However, U.S. persons will be authorized to provide maritime transportation services related to Russian seaborne oil that is being sold below the price cap for use elsewhere.

OFAC announced the price cap on Russian crude oil will take effect on December 5, 2022, while the price cap on other Russian petroleum products will take effect on February 5, 2023. Although the guidance acknowledged that the G7 has not yet reached a consensus on setting the price cap, OFAC expressed confidence that the policy will “reduce the revenues the Russian Federation earns from oil after its own war of choice in Ukraine [that] has inflated global energy prices.”

The guidance states that the price cap program will include a recordkeeping and attestation process that allows each party in the supply chain of seaborne Russian oil to demonstrate or confirm that oil has been purchased at or below the price cap.  Parties who conform to this recordkeeping and attestation process will have a safe harbor if it is discovered that they inadvertently provided services related to the purchase of seaborne Russian oil above the price cap due to falsified records provided by those who act in bad faith and make material misrepresentations.

OFAC also provided examples of red flags for evasion of the price cap, including:

  • Evidence of deceptive shipping practices;
  • Refusal or reluctance to provide requested price information;
  • Unusually favorable payment terms, inflated costs, or insistence on using circuitous or opaque payment mechanisms;
  • Indications of manipulated shipping documentation, such as discrepancies of cargo type, voyage numbers, weights or quantities, serial numbers, shipment dates, etc.;
  • Newly formed companies or intermediaries, especially if registered in high-risk jurisdictions; and
  • Abnormal shipping routes.

The guidance concludes by noting that additional details and red flag guidance will be provided in the future and by advising service providers to remain vigilant and “review the information available to them for potential red flags” indicative of deceptive, sanctionable, or illicit maritime trade.



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