U.S. Tightens Enforcement of Price Cap on Russian Oil

The U.S. Department of the Treasury has intensified its efforts to enforce the price cap on Russian oil by taking action against shipowners and vessels involved in transporting Russian crude oil above the cap.

The Treasury Department’s Office of Foreign Assets Control (OFAC) has designated SUN Ship Management, a Government of Russia-owned ship manager based in the UAE, along with several lesser-known oil traders who have become frequent participants in the seaborne transportation of Russian-origin oil since the price cap was imposed.

SUN Ship Management, owned by the Russian Federation’s owned fleet operator Sovcomflot (SCF), manages vessels owned by SCF. Notably, SUN Ship manages the SCF Primorye, a vessel previously identified by OFAC for transporting Russian crude oil priced above $60 per barrel, surpassing the price cap, while utilizing the services of a U.S.-based provider that is subject to certain restrictions.

The Price Cap Coalition, consisting of the G7, the European Union, and Australia, has agreed to prohibit the import of Russian crude oil and petroleum products and restrict related maritime transport services unless they are bought and sold at or below specific price caps. The policy aims to ensure a reliable supply of oil while reducing Russian Federation’s oil revenues following its invasion of Ukraine and inflated global energy prices.

Since the implementation of the price cap, lesser-known oil traders with opaque ownership structures have emerged as significant participants in the seaborne transport of oil produced by major Russian oil companies, accounting for up to half of Russia’s oil exports.

OFAC, in coordination with the Price Cap Coalition, has also updated the Guidance on Implementation of the Price Cap Policy for Russian Oil, aligning with G7 Leaders’ commitments to strengthen compliance and enforcement, including sanctions on deceptive practices and updating rules and regulations.

In addition to SUN Ship, the Treasury Department’s announcement today identified multiple lesser-known oil traders for their involvement in facilitating Russian seaborne oil shipments.

Bellatrix Energy Limited and Covart Energy Limited, both based in Hong Kong, have significantly increased their share of the Russian oil trade since the price cap policy was implemented. According to the Treasury Department, they have made numerous port calls in Russia and received loans from Russian state-owned banks. Voliton DMCC, based in the UAE, has also seen an increase in its share of the Russian oil trade. These companies, along with their vessels, have been designated by OFAC for operating in the marine sector of the Russian economy.

“Today’s designations demonstrate our commitment to upholding the principles of the price cap policy, which advance the goals of supporting stable energy markets while reducing Russian revenues to fund its war against Ukraine,” said Deputy Secretary of the Treasury Wally Adeyemo. “Participants in the maritime transport of Russian oil, especially Tier 1 actors like traders, must adhere to the compliance guidelines agreed upon by the Price Cap Coalition or face the consequences.”

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