US Treasury Issues New Guidance for Price Caps on Russian Oil

The San Sebastian oil tanker is moored at the docks of the ISAB refinery in Priolo-Gargallo near Syracuse, Sicily, on May 31, 2022. The ISAB, owned by Russia’s Lukoil, employs 1,000 people directly and another 2,500 in related activities. In an ironic turn, Italy has increased its imports of Russian oil in a period when the rest of Europe has been slashing its purchases from Moscow, even before the sanctions. That’s because banks have refused to take the risk of extending credit to Russia-controlled ISAB that would allow them to buy oil from non-Russian sources, even if financial sanctions did not specifically bar them from doing so. AP Photo/Gaetano Adriano Pulvirenti

The Department of the Treasury recently issued new guidance for price caps on Russian oil, in order to keep energy markets calm.

The announcement by Washington is intended to provide breathing room for energy traders and shipping companies, as it attempts to reassure the markets about its new round of sanctions.

The Treasury announced, on Oct. 31, that said ships containing Russian oil before Dec. 5 and which unload at their destination by Jan. 19 will not be subject to the price cap imposed by Western governments.

However, sales of Russian oil shipments on or after Dec. 5 will be place under the price cap in order to have access to Western-owned insurance, financial, and shipping services, over which they have a monopoly.

The Western allies plan to enforce the cap by denying maritime services for insurance, finance, brokering, and navigation for Russian oil shipments above the price cap.