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US announces new sanctions to tighten Russian oil price cap

by Martin Fornusek December 21, 2023 12:01 AM 2 min read
Oil storage tanks stand at the RN-Tuapsinsky refinery, operated by Rosneft Oil Co., as a tanker sails beyond in Tuapse, Russia, on March 23, 2020. (Illustrative purposes only) (Andrey Rudakov/Bloomberg via Getty Images)
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The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced on Dec. 20 new sanctions targeting companies shipping Russian oil, building upon earlier measures to tighten the $60-per-barrel price cap.

Russia has largely managed to avoid the cap instituted by the Group of Seven (G7) last year, utilizing a "ghost fleet" of tankers often sailing without Western insurance and other services.

The OFAC extended sanctions against SUN Ship Management D Ltd, a company owned by Russian shipping firm Sovcomflot.

SUN Ship manages some of Sovcomflot's ships, including SCF Primorye, a vessel that was previously identified as transporting Russian oil above the price cap.

"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 Treasury Secretary Wally Adeyemo.

The new sanctions also targeted obscure oil traders with opaque ownership that play a major role in transporting Russian crude, such as the Hong Kong-based Bellatrix Energy Limited and Covart Energy Limited or the United Arab Emirates-based Voliton DMCC.

"Since the imposition of the price cap, little-known oil traders with opaque ownership structures have emerged as frequent participants in the seaborne transport of oil produced by major Russian oil companies, shipping up to half of Russia's oil exports," the OFAC's statement read.

In coordination with the other countries of the Price Cap Coalition, the U.S. has also updated the rules on trading crude oil and petroleum products of Russian origin.

Both the U.S. and the EU began ramping up sanctions to enforce the price cap on Russian seaborne crude. The measure was imposed last December to limit Moscow's oil revenue without destabilizing global markets.

Although Russia managed to largely avoid the cap in recent months, Russian oil and gas profits dropped by 41% in the first nine months of 2023 amid tightening sanctions.

Washington first sanctioned the violators of the price cap in October, targeting two companies and two of their tankers.

More recently, in December, the U.S. imposed restrictions on three more shipping companies for breaching the $60-per-barrel limit.

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