Time running out to avoid Russian price cap chaos, says legal expert
A US lawyer says ships are being fixed now for December. However, the US Department of the Treasury’s Office of Foreign Assets Control has yet to provide details of ‘attestation’ requirements
As a price cap on Russian oil looms, US officials have said they will not play a game of ‘gotcha’ in relation to sanctions — but enforcement will nonetheless be ‘vigorous’
A LEADING maritime lawyer says that implementing a price cap on Russian oil is likely to be more complex and onerous than with previous sanctions, while time is running out for the scheme to avoid having a chaotic introduction.
“The sanctions regime is right around the corner and ships are already being fixed in advance for that period,” said Bruce Paulsen, a partner at New York-based shipping law firm Seward & Kissel.
A price cap coalition led by the Group of Seven countries and the European Union is aiming to launch the price cap alongside the end of EU crude oil imports from Russia on December 5.
“Who knows what is going to happen on December 5?” Mr Paulsen told a Marine Money conference in Athens.
Preliminary guidance issued last month by the US Department of the Treasury’s Office of Foreign Assets Control established some parameters for the US side of what is being seen as an unprecedented cross-border effort to impose a price-linked restriction on trade with a rogue nation.
However, many questions about the precise requirements on the various tiers of the industry remain unanswered.
“Let’s see if we get formal guidance in time to get this going,” Mr Paulsen said.
Shipping companies and financial institutions providing trade finance were among so-called ‘second-tier actors’ in Ofac parlance that will be expected to request and retain price information from the likes of refineries, importers, traders and commodity brokers — or provide “attestations” received from them — to demonstrate compliance with the cap.
“Ofac has not yet provided guidance on what attestation looks like,” he said. “This is much more complex than prior sanctions regimes, which were about not doing business with a particular person or country.”
According to Mr Paulsen, one difference with previous sanctions was a new ‘reject and report’ requirement, details of which awaited clarification.
However, it meant that unlike conventional sanctions under the price cap, simply not doing business with Russia was “not enough”.
Mr Paulsen was also concerned that, despite US officials proclaiming that they wanted to have a dialogue with the industry, the administrative burden that would fall on companies was likely to be heavy.
“Ofac has said it seeks to engage with the industry and is not looking to play a ‘gotcha’ game.
“Nevertheless, it has emphasised that vigorous enforcement of this policy is anticipated.”
US entities were subject to Ofac’s maritime services ban and would need to address the record-keeping and attestation requirements, but non-US companies were also exposed.
Secondary sanctions, which can be slapped on overseas, are not contemplated under the price cap mechanism, but action may be taken against companies with US exposure, potentially including the use of dollars in the transactions.
According to Mr Paulsen, the goals of the price-ceiling programme — to reduce Russian oil revenue and to maintain oil supply — were “contradictory”.
“It is going to be complicated to implement and enforce,” he said.