The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has announced its second price cap enforcement action of 2024, imposing sanctions on four entities and designating one vessel as blocked property.
According to OFAC, the targeted entities and vessel were involved in a price cap violation scheme related to Russian oil in late 2023. The sanctions aim to enforce the international coalition’s price cap on crude oil and petroleum products of Russian Federation origin, limiting Russia’s revenue from its oil exports after its conflict with Ukraine inflated global energy prices.
What is the price cap?
The United States is part of an international coalition of countries (the Price Cap Coalition), including the G7, the European Union, and Australia, that have agreed to prohibit the import of crude oil and petroleum products of Russian Federation origin (Russian oil).
These countries, home to many best-in-class financial and professional services, have also agreed to restrict a broad range of services related to the maritime transport of Russian oil—unless that Russian oil is bought and sold at or below the specific price caps established by the Coalition or is authorized by a license.
This policy is known as the “price cap.” The price cap is intended to maintain a reliable supply of crude oil and petroleum products to the global market while reducing the revenues the Russian Federation earns from oil after its own war of choice against Ukraine inflated global energy prices.
The U.S. Treasury’s action aims to reinforce the commitment to maintaining a reliable global oil supply while reducing Russia’s earnings from oil exports.
The enforcement action also specifically addresses a November 2023 price cap violation involving the vessel NS Leader, which transported Russian Urals crude oil priced above the $60 per barrel cap.
As a result, sanctions implications for the designated four entities involved in the transaction, include blocking all property and interests in the United States and prohibiting transactions involving the designated or blocked persons unless authorized by OFAC.
In addition to the price cap enforcement, OFAC has issued two determinations implementing G7 commitments to ban the importation of Russian diamonds. The prohibitions include certain categories of non-industrial diamonds mined in Russia, expanding on September 1, 2024, and diamond jewelry and unsorted diamonds of Russian Federation origin, effective March 1, 2024.
Today’s action against vessels violating the price cap on Russian oil should serve as a continued warning that we can and will enforce violations of the cap. Further, OFAC’s determinations help us meet the commitments made by G7 leaders in December to reduce Russian revenue derived from the diamond trade.
… said Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson