The U.S. Treasury issued rough compliance guidelines on Friday for its proposed cap on the price of Russian oil, focusing on the documentation needed by the private sector to comply with the program.
The guidance, issued by the Treasury’s Office of Foreign Assets Control, gives private companies the task of enforcing the cap by seeking certification that Russian oil is sold at or below a price set by the U.S. along with other Group of Seven members. The guidance is aimed at the insurance companies and financial firms that facilitate the international oil trade.
The cap is meant to be in place by the Dec. 5 for crude oil, and Feb. 5 for petroleum products, in line with the implementation of the European Union’s ban on services associated with seaborne oil and refined products.
The program “will rely on a record keeping 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,” OFAC said in the statement, adding the following details:
“Actors who regularly have direct access to price information in the ordinary course of business, such as commodities brokers and refiners, should retain and share, as needed, documents that show that seaborne Russian oil was purchased at or below the price cap”
Firms who don’t have direct access to pricing information should request that, and if they cannot obtain price information “should request customer attestations in which the customer commits to not purchase seaborne Russian oil above the price cap”
“This record keeping and attestation process is designed to create a ‘safe harbor’ for service providers from liability for breach of sanctions,” OFAC said.
The statement also warned service providers to watch for certain “red flags” indicating possible violations of the price cap, including the refusal or reluctance to provide price information, unusually favourable payment terms and indications of manipulated shipping documents.
The guidance came hours after officials said Russia would have an economic incentive to participate.
Treasury Deputy Secretary Wally Adeyemo on Friday highlighted that European Union and G-7 countries account for 90 per cent of global shipping insurance, along with the majority of financing and payments services for the market.
He also said the G-7 is working to make it straight-forward for companies to comply with the oil-priced cap, while also impose consequences if they seek to get around it. His Treasury colleague Ben Harris said, “We absolutely need the cooperation of the private sector in order to facilitate this trade.”
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