© Reuters. A view shows oil tanks at the NNK-Primornefteproduct petroleum depot in the far eastern port of Vladivostok, Russia June 11, 2022. Picture taken with a drone. REUTERS/Tatiana Meel
By David Lawder and Andrea Shalal
WASHINGTON (Reuters) – The US Treasury on Friday issued new guidance on a proposed Western price cap on Russian oil exports, saying that maritime services providers would not be held liable for false pricing information provided by buyers and sellers of Russian crude.
The Treasury said in the guidance https://home.treasury.gov/system/files/126/cap_guidance_20220909.pdf that those purchasing Russian crude at prices above the cap who knowingly provide false documentation could be subject to investigations for sanctions violations. It said governments participating in the cap would share such information to help police it.
The price cap plan agreed by G7 wealthy nations calls for participating countries to deny insurance, finance, brokerage, navigation and other services to oil cargoes priced above a yet-to-be-determined price cap on crude and oil products.
The Treasury said these service providers should retain records on Russian oil shipments for five years.
“Where a service provider without direct access to price information reasonably relies on a customer attestation, that service provider will not be held liable for potential sanctions breaches because of those acting in bad faith” who seek to violate or evade the cap,” the guidance said.
Nevertheless, Treasury warned these firms to be “vigilant” about red flags indicating potential evasion or fraud, including evidence of deceptive shipping practices, refusal to provide requested price information, unusually favorable terms that could indicate a back-end arrangement to evade the price cap , or excessively high service costs.
It said any signs of manipulated documents, newly formed companies and abnormal shipping routes should also raise concerns.
The Treasury said the countries participating in the price cap will work together to set the cap levels for Russian and high-volume and low-volume petroleum product cargoes.
The consensus on the price cap levels will be reached with the aid of a “rotating lead coordinator” the department said, suggesting that countries in the coalition will have a temporary leadership role as the plan proceeds.
TOMORROW TIME NEEDED
Treasury Assistant Secretary for Economic Policy Ben Harris said on Friday that it would be a few more weeks before the price cap plan is fully developed, including determination of the cap level.
At a Brookings Institution event, Harris asked skeptics of the cap to “wait for all the information and perhaps hold your fire before you conclude this will be too challenging to implement.”
Western sanctions imposed against Russia over its invasion of Ukraine have led to a sharp collapse in Russian imports, hitting its domestic production hard, while foreign companies have exited the country in droves.
At the same time, Russia’s oil industry has benefited from a 60% increase in oil prices that has more than offset a decline in export volumes.