The US Government Imposes Sanctions on Two Shipping Firms Over Breach of Russian Oil Price Restriction

14 Oct, 2023

The US Government Imposes Sanctions on Two Shipping Firms Over Breach of Russian Oil Price Restriction

The United States Treasury Department announced on Thursday that it had enforced its initial set of sanctions against two companies that shipped Russian oil, contravening the multinational price cap agreement. This initiative, backed by the United States, the European Union, countries in the Group of Seven, and Australia, had collectively set a limit of $60 per barrel on what Russia could charge for its oil. The primary aim was to curtail revenue to the Kremlin, thereby undermining its capacity to fund the ongoing conflict in Ukraine. This, in turn, pressured the Russian government into selling its oil at a discounted rate or channelling funds into the costly development of an alternative shipping network.

The two penalized companies are based in the United Arab Emirates and Turkey, as confirmed in a statement by the Treasury Department. Lumber Marine, a company headquartered in the UAE, dispatched a ship that transported Russian oil priced above $75 per barrel. In a separate incident, Ice Pearl Navigation, a Turkish-based company, transported Russian oil priced at $80 per barrel. Notably, both of these companies were reliant on US service providers.

In response to these sanctions, the Biden administration has taken measures to hinder the companies from conducting business or accessing any property or financial interests in the United States.

An unnamed senior treasury official, speaking under the condition of departmental rules, revealed that the government traditionally contacts the flagging nation and insurer of a ship suspected of violating the price cap. This generally results in the ship losing access to insurance or being deregistered by the respective nation.

The official also pointed out that Russia had attempted to create an alternative shipping network to bypass the imposed price cap, but this endeavor turned out to be considerably expensive, with private analyses indicating a cost of $35 per barrel of oil.

The administration argues that the price cap has yielded success, causing a 45% decrease in Russian oil tax revenue over the past year. The official reiterated that the focus of enforcing the cap will be on further increasing costs for Russia's oil industry, thereby reducing Moscow's available funds to support its military efforts in Ukraine.

The coalition responsible for enforcing the price cap has additionally released a series of recommendations aimed at enhancing compliance within the maritime oil industry. These guidelines are directed toward both nations and private companies and advocate for the necessity of legitimate insurance for all vessels, adherence to industry-standard classifications, and the implementation of policies that reinforce sector monitoring.