THE PRICE cap on Russian oil products will be implemented via a two-tier system, according to a joint statement by the G7 and Australia price cap coalition.
Products that trade at a premium to crude will be capped at $100 per barrel, while those that trade at a discount to crude will be capped at $45 per barrel, according to the US Office of Foreign Asset Control’s guidance.
The former category includes gasolines, motor fuel, blending stock, gasoil and diesel fuel, kerosene and kerosene-type jet fuel, and vacuum gas oil; the latter includes naphtha, residual fuel oil, and waste oils.
The cap will be implemented across the G7 nations and Australia on February 5 “or very soon thereafter,” according to the joint statement.
"Our respective regimes are expected to include time-limited exceptions for transactions involving petroleum products that are loaded onto a vessel at the port of loading prior to 5 February 2023," it added.
The price cap applies from the embarkment of maritime transport through the first landed sale outside of Russia.
According to Ofac’s guidance, if the product is “substantially transformed” outside of Russia, it is no longer considered to be of Russian origin and the cap no longer applies.
“For the purposes of the petroleum products determination, OFAC will only consider blending operations to be substantial transformation if a blending operation results in a tariff shift of the Russian petroleum product.”
However, if after clearing customs the product is loaded back on a ship without being substantially transformed, the price cap still applies.
According to Ofac, the cap does not apply to products that were loaded prior to February 5, 12:01 EST as long as they are unloaded before April 5, 12:01 EST.
The cap on refined Russian products complements the one was placed on Russian oil on December 5.
Under the caps, maritime providers can only offer services like insurance, flagging, or financing for vessels carrying Russian crude or products if they were sold at or below their respective price caps.
US Secretary of the Treasury Janet Yellen said in a statement: “Senior Russian officials have repeatedly admitted that the crude oil price cap is cutting into their most important source of revenue and has darkened the Kremlin’s already troubled fiscal outlook.”
“Global energy markets have also remained well-supplied, and public reports indicate that crude oil importers are using the price cap to drive steep bargains on Russian oil imports. Low- and medium-income countries have particularly benefitted from the crude oil price cap, which is helping to shield them from the high global energy costs caused by Putin’s unprovoked war of aggression,” she added.
https://lloydslist.maritimeintelligence.informa.com/LL1143863/Price-cap-coalition-sets-two-price-levels-for-petroleum-products
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