(Reuters) -New guidance issued by the U.S. Treasury adds more detail to a complex plan by the European Union, G7 nations and Australia to cap the price of Russian oil starting on Dec. 5.
Aiming to deprive Moscow of a war profit premium on its oil, the price cap plan has for months left shipping services providers confused about what specific rules they will need to abide by to avoid sanctions.
The new guidance from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) answers a few key questions, including when the restrictions will take effect and what types of scenarios and companies will be bound by them.
Crucially, though, the guidance does not yet state what the price cap will be, something that the United States is still hashing out with its partners. However, the guidance made clear the cap would be on a free-on-board (FOB) basis, meaning the costs of shipping, freight, customs and insurance are not included.
Here are key points from the latest guidance:
START AND STOP
While shipping and insurance are covered services, these costs are distinct from the price cap on Russian oil,” the guidance stated.
Oil cargoes loaded before 12:01 a.m. EST (0501 GMT) on Dec. 5, and docking before Jan. 12, will not be covered by the price cap policy, OFAC said. This provides a grace period for cargoes purchased above the cap prior to Dec. 5 to reach their destinations on often long sea voyages.
Any oil purchased or docked after those times, however, will need to adhere to the price cap.
In addition, the price cap only applies to the first “landed” sale outside of Russia, meaning the first point at which the cargo comes ashore. If the oil is resold on land after that point, it can be sold above the cap.
The guidance makes clear, however, that if the cargo goes back out to sea without having been substantially transformed ashore outside of Russia – like having been refined into fuel – it falls back under the price cap.
Oil certified as originating in another country but transiting through and offloaded from Russia would not be covered by the cap, OFAC said, citing Kazakh oil exports via the Caspian Pipeline Consortium (CPC) Black Sea terminal.
RUSSIAN IMPORTS STILL BANNED IN U.S.
The new guideline will not allow U.S. companies to import Russian oil, OFAC said, emphasizing that a U.S. ban imposed in March after Russia’s invasion of Ukraine remains in effect.
But the guidance pointed out that U.S. trading firms can be involved in sales to other destinations as long as they conform to the price cap rules.
In a move which could also comfort some players in the global shipping industry, the guidance further sketched out which types of companies would be obligated to participate in the cap plan. They include trading and commodities brokers, and companies involved in financing, shipping, insurance, flagging, and customs brokering.
More tangential participants would not be covered by the policy, like those providing only insurance for crew members and their medical care, or inspection and pilotage of oil tankers.
Shippers had been concerned that pilots would be covered by the restrictions, which might have increased the chances for accidents in tricky waterways.
(Reporting By Noah Browning; Editing by Marguerita Choy)
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