Russian Oil Price Cap

At a Glance…

Shortly before the 5 December 2022 ban on maritime services for the transportation of Russian crude oil, the UK, EU and U.S. each published details on the relevant price cap relating to oil products with HS/CN Code 2709 (crude) that are of Russian origin or consigned or exported from Russia.

This follows the recent publications of the UK’s “Maritime Services Prohibition and Oil Price Cap Guidance” and OFAC’s equivalent guidance of 9 September 2022. These were discussed in our earlier client alert.

This client alert addresses the recently announced oil price cap and associated restrictions on maritime services. A further client alert on the updated guidance published by the UK, EU and U.S. will follow shortly.

Authors: Leigh T. Hansson; Alexander Brandt; Ray-Shio Ho; William Young; Athina A. Douni; Sophie C. Davis; Tan Albayrak; Maria Zermasli; Dimitris Athanasopoulos; James Willn and Finlay Donaldson

Capability:Energy & Natural Resources; Regulatory & Investigations and Transportation

Maritime transportation and services ban

The UK, EU and U.S. restrictions are materially aligned and effectively prohibit the maritime transportation and services for the supply or delivery of Russian origin or Russian consigned / exported oil for maritime voyages between Russia and a third country or between two third countries. For the purposes of this client alert, “third country” refers to a country that is not the UK, the U.S., Canada, Japan or Australia, or not in the EU.

These restrictions apply from 5 December 2022 for HS/CN Code 2709 products and from 5 February 2023 for HS/CN Code 2710 products of Russian origin or that are Russian consigned or exported from Russia (Restricted Oil Products).

In respect of HS/CN Code 2709 products, there is a wind-down if the oil was loaded onto a ship before 5 December 2022 provided that it is discharged and clears customs in a third country before 19 January 2023.

Permitted maritime transportation and services

The relevant publications on the price cap are as follows:

• UK General Licence
• U.S. Determination
• EU Amending Regulation and Implementing Regulation

The maritime transportation and services restrictions do not apply in relation to Restricted Oil Products that fall under HS/CN Code 2709 if the “unit price” (being the price per barrel) of such products is at or below US$60.

This price cap covers only the price of Restricted Oil Products. Ancillary costs including, but not limited to, transportation and legal fees are not subject to the price cap.

The relevant price cap relating to Restricted Oil Products that fall under HS/CN Code 2710 will be published by the UK, EU and U.S. in due course.

The price cap restrictions will apply from shore to shore, i.e., from receipt of the relevant cargo onboard a ship up to the point where it is delivered and is substantially transformed into a different good in line with the applicable rules of origin (e.g., the resulting product comes under a different HS/CN code).

In other words, every transaction from loading of the Restricted Oil Products cargo onboard a ship until such cargo is substantially transformed into a different good in line with the UK, EU and U.S. rules of origin must comply with the price cap in order for the price cap exemption to be available.

The EU intends to regularly review the relevant price cap to ensure that it is “at least 5% below the average market price for Russian oil and petroleum products, calculated on the basis of data provided by the International Energy Agency”.

Updated guidance

Over the past few weeks, the UK, EU and U.S. have each published and/or updated their relevant guidance on the price cap restrictions. A further client alert on the respective guidance will follow shortly.

Leigh T. Hansson Partner, London, Washington D.C. +44 (0)20 3116 3394, +1 202 414 9394 lhansson@reedsmith.com		Alexander Brandt Counsel, London +44 (0)20 3116 3733 abrandt@reedsmith.com

	Ray-Shio Ho Associate, London +44 (0)20 3116 3773 rho@reedsmith.com		William YoungAssociate, London +44 (0)20 3116 3766 wyoung@reedsmith.com

	Athina A. Douni Associate, London +44 (0)20 3116 3653 adouni@reedsmith.com		Sophie C. Davis Associate, London +44 (0)20 3116 3722 sophie.davis@reedsmith.com

	Tan Albayrak Associate, London +44 (0)20 3116 3481 talbayrak@reedsmith.com		Maria Zermasli Associate, Athens +30 210 41 99 434 mzermasli@reedsmith.com

	Dimitris Athanasopoulos Associate, Athens +30 210 41 90 500 dathanasopoulos@reedsmith.com		James Willn Partner, Dubai, Abu Dhabi +971 4 709 6368, +971 2 418 5768 jwilln@reedsmith.com

Finlay Donaldson Associate, Dubai +971 (0)4 709 6353 fdonaldson@reedsmith.com