The weaponization of energy exports is on full display as the US warns of imposing sanctions on buyers of Russian oil that would flout the G7-proposed price cap.
In guidance issued by the Treasury Department, the Office of Foreign Assets Control expects an executive order that would prohibit maritime services for buyers, “if the seaborne Russian oil is purchased above the price cap.”
“Persons that make significant purchases of oil above the price cap and knowingly rely on service providers subject to the maritime services policy, or persons that knowingly provide false information, documentation, or attestations to such a service provider, will have potentially violated the maritime services policy and may be a target for a sanctions enforcement action,” the guidance noted.
To The Russian Federation in Response to Continued Russian Federation Aggression
Source: US Treasury Department
Biden administration’s proposed ban is expected to take effect on December 5, 2022 for crude oil trade and February 5, 2023 for petroleum product shipments.
“As a legal matter and consistent with other implementing partners, this framework will be implemented as a ban, from which there will be an exception for the purchase of Russian seaborne oil at or below the cap,” the guidance read.
The newest restrictions would be mainly for non-US actors that are utilizing Western maritime services for its import of Russian oil since the US already has a total ban on Russian oil and petroleum imports in place.
This follows the G7 finance ministers’ agreement to finalize and implement a cap on the price of Russian oil earlier last week. The coalition would move to enjoin other nations that are agreeable to the proposed price cap in a consultation process to the determine said ceiling price.
On the other hand, Russian President Vladimir Putin threatened to stop energy exports altogether should the oil price cap be implemented.
“We will not supply gas, oil, coal, heating oil — we will not supply anything,” he said.
This comes after Moscow decided to keep the Nord Stream 1 pipeline shut, closing off natural gas exports to Europe until the West lifts the sanctions–seemingly in retaliation for the proposed gas price cap. This adds to Putin’s threat to slash the export of Ukrainian grain by backing out of the grain agreement brokered after the war broke out.
Seemingly a response to the proposed oil price cap, OPEC+ also decided to reduce its October production back to its August levels, saying that the “upward adjustment of 0.1 million barrels per day to the production level was only intended for the month of September 2022.”
JP Morgan analyst also predicted that the oil-producing states might have to cut its oil production further by 1 million barrels per day given the uncertainty in commodities markets and the falling oil prices.
Information for this briefing was found via The Financial Times. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
