On September 9, 2022, the U.S. Department of the Treasury issued preliminary guidance (Preliminary Guidance) providing the initial outline of a long-anticipated price cap on Russian-origin crude oil and petroleum products (Price Cap), taking effect December 5, 2022 and February 5, 2023, respectively.[1]  The Price Cap is expected to be implemented by “a coalition of countries including the G7 and the EU” and follows an earlier statement of intent issued September 2, 2022 by G7 finance ministers.[2]

The effective dates of the Price Cap are identical to those of existing EU bans on seaborne imports of Russian crude oil and petroleum products.[3]  These bans were issued June 3, 2022, as part of the European Union’s sixth sanctions package against Russia, previously discussed in our blog.[4]  Although, strictly speaking, the Preliminary Guidance sets forth OFAC’s implementation and enforcement of the Price Cap, as a practical matter, it reflects close discussions with other coalition members, which are expected to implement substantively similar mechanisms and work together with OFAC in enforcement, including through information sharing.[5]

Maritime Services Policy and Safe Harbor

As announced, the Price Cap effectively consists of two components.  The first component is a “Maritime Services Policy.”  Similar to previously announced maritime services bans by the European Union and United Kingdom, a broad range of services will be prohibited for maritime transportation of Russian-origin crude starting Dec. 5, 2022, and of Russian-origin petroleum products starting Feb. 5, 2023.[6]  According to the Preliminary Guidance, OFAC anticipates issuing a determination pursuant to Executive Order 14071 implementing a services ban on certain maritime services.  Although the Preliminary Guidance does not expressly identify the covered services, which will be further elaborated in future guidance, it lists as examples financial institutions providing trade finance, shippers, insurance brokers, cargo / H&M insurers, reinsurers, and P&I clubs.

The second component of the Price Cap is a “Price Exception” that provides a safe harbor from the Maritime Services Policy for “jurisdictions or actors” that purchase seaborne Russian oil “at or below a price cap” to be established by the coalition.  The level of the price cap will be determined by a consensus-based consultative process involving “a technical exercise to consider a range of factors and, aided by a rotating lead coordinator.”[7]  A senior U.S. Treasury official separately stated in recent public remarks that the coalition “intend[s] to set the price cap above Russia’s marginal cost of production, at a level consistent with prices they have historically accepted.”[8]  Importation of Russian crude oil and petroleum products into the United States remains prohibited.[9]

Recordkeeping and Attestations

Compliance and enforcement of the oil cap will rely on a recordkeeping and attestation process whereby so-called “Tier 1” market actors with direct access to price information (e.g. refiners, importers, commodities brokers, traders, customs brokers) are expected to retain and share price information (e.g. invoices, contracts, receipts / proof of accounts payable) or attestations of such information, to so-called “Tier 2” and “Tier 3” service providers that are only sometimes able to request price information, or do not have direct access to price information, respectively.

For each tier of market actors, the Preliminary Guidance offers recommendations for risk-based measures to comply with the Price Cap, including updating terms and conditions of contracts, due diligence request templates, and policy terms and conditions.  The Preliminary Guidance also lists potential red flags for price cap evasion, including evidence of deceptive shipping practices, reluctance to provide requested price information, unusually favorable payment terms, inflated costs, or insistence on using circuitous or opaque payment mechanisms, indications of manipulated shipping documentation, newly formed companies in high-risk jurisdictions, and abnormal shipping routes.  Market actors in all three tiers are expected to retain relevant records for five years.


The Preliminary Guidance states that parties 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” may be liable for violating sanctions – likely under OFAC’s theory of “causing” a U.S. person to violate sanctions.  As such, they may be targets for a civil or criminal enforcement actions.

Notably, the guidance is silent on the imposition of secondary sanctions, as well as purchases of oil above the price cap without reliance on covered service providers (though the exclusion of all U.S., EU, and UK trade finance, insurance, and other service providers may raise difficulties as a practical matter).   A U.S. Treasury Department spokesperson is reported to have confirmed that “[t]hose who do not wish to participate in the price cap are free to continue to purchase Russian oil but will face a premium price without western services” and that the Preliminary Guidance “does not imply secondary sanctions on purchasers of Russian oil who do not use G7 or coalition services, but those who make material misrepresentation or fraudulent documentation to evade the price cap may be subject to enforcement action.”[10]

[1] U.S. Dep’t of the Treasury, “Preliminary Guidance on Implementation of a Maritime Services Policy

and Related Price Exception for Seaborne Russian Oil” (Sept. 12, 2022), https://home.treasury.gov/system/files/126/cap_guidance_20220909.pdf.

[2] G7 Finance Ministers´ Statement on the united response to Russia´s war of aggression against Ukraine (Sept. 2, 2022), https://www.bundesfinanzministerium.de/Content/EN/Downloads/G7-G20/2022-09-02-g7-ministers-statement.pdf?__blob=publicationFile&v=7.

[3] See Council Regulation (EU) 2022/879 of 3 June 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine, https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R0879&from=EN#d1e787-53-1

[4] Cleary Trade Watch, Sanctions Developments Resulting From the Conflict in Ukraine – European Union (June 8, 2022), https://www.clearygottlieb.com/news-and-insights/publication-listing/sanctions-developments-resulting-from-the-geopolitical-conflict-in-ukraine—european-union#_ftn35.

[5] Preliminary Guidance at 5.

[6] Council Regulation (EU) 2022/879; Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022, https://www.legislation.gov.uk/uksi/2022/850/contents/made.

[7] Preliminary Guidance at 2.

[8] U.S. Dep’t of the Treasury, “Remarks by Deputy Secretary of the Treasury Wally Adeyemo at the Brookings Institution” (Sept. 9, 2022), https://home.treasury.gov/news/press-releases/jy0943.

[9] See Executive Order 14066 (Mar. 8, 2022), https://home.treasury.gov/system/files/126/eo_14066.pdf.

[10] Financial Times, “US warns of sanctions for buyers that flout price cap on Russian oil” (Sept. 9, 2022), https://www.ft.com/content/e5b63797-1aad-46cd-ab30-c1b5d014b140.