Treasury’s Office of Foreign Assets Control (OFAC) has targeted Joint Stock Company Sovcomflot, Russia’s state-owned shipping company and fleet operator. In addition to designating Sovcomflot, OFAC is identifying 14 crude oil tankers as property in which Sovcomflot has an interest.
“The price cap on Russian oil continues to serve its twin goals of limiting Kremlin profits while promoting stable energy markets,” said Deputy Secretary of the Treasury Wally Adeyemo. “Today, we take the next step by targeting Russia’s largest state-owned shipping company and fleet operator, dealing a huge blow to their shadow operations. We are entering the next phase of increasing Russia’s costs in a responsible manner to mitigate risks.”
Concurrent with the designation of Sovcomflot, OFAC is also issuing a general license authorizing the offloading of crude oil (or other cargo) from these 14 vessels for a period of 45 days. In addition, OFAC is issuing a general license authorizing transactions with all other Sovcomflot-owned vessels at this time. Nothing in these general licenses changes any of the restrictions imposed by the price cap sanctions regime.
Sovcomflot was designated pursuant to Executive Order (E.O.) 14024 for operating or having operated in the marine sector of the Russian Federation economy and for being owned or controlled by, or having acted for or on behalf of, directly or indirectly, the Government of the Russian Federation. Sovcomflot has also been sanctioned by Australia, Canada, New Zealand, and the United Kingdom (UK) and is under certain European Union (EU) restrictions.
A new Treasury analysis released today found that the United States’ increased sanctions enforcement is forcing Russia to sell oil at a steeper discount and limiting their revenue. Putin’s oil czar has linked Russia’s further loss of revenue to the actions reflected in the second phase of the price cap.
The United States is part of an international coalition of countries (the Price Cap Coalition), including the G7, the European Union, and Australia, that have agreed to prohibit the import of crude oil and petroleum products of Russian Federation origin (“Russian oil”). These countries, home to many best-in-class financial and professional services, have also agreed to restrict a broad range of services related to the maritime transport of Russian oil—unless that Russian oil is bought and sold at or below the specific price caps established by the Coalition or is authorized by a license. This policy is known as the “price cap.” The price cap is intended to maintain a reliable supply of crude oil and petroleum products to the global market while reducing the revenues the Russian Federation earns from oil after its own war of choice against Ukraine inflated global energy prices.
On February 1, 2024, the Price Cap Coalition published an Oil Price Cap (OPC) Compliance and Enforcement Alert (the “Alert”). The Alert, which is directed at both government and industry stakeholders, provides examples of specific evasion methods to improve compliance measures, and provides avenues to report suspected oil price cap breaches to members of the Price Cap Coalition.
On December 20, 2023, OFAC, in coordination with the Price Cap Coalition, updated its Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin, to strengthen the attestation and recordkeeping processes for certain covered service providers and reduce opportunities for bad actors to disguise Russian oil purchased above the cap.
On October 12, 2023, the Price Cap Coalition published a Coalition Advisory for the Maritime Oil Industry and Related Sectors (“the Advisory”). The Advisory, which is directed at both government and private sector actors involved in the maritime trade of Russian oil, provides recommendations concerning specific best practices and reflects our commitment to promoting responsible practices in the industry, preventing and disrupting sanctioned trade, and enhancing compliance with the price cap.
OFAC previously published an Alert on Possible Evasion of the Russian Oil Price Cap on April 17, 2023.
Treasury's Office of Foreign Assets Control (OFAC) is issuing Russia-related General License 88A, "Authorizing the Wind Down of Transactions Involving Certain Entities Blocked on February 23, 2024;" Russia-related General License 91A, "Authorizing Limited Safety and Environmental Transactions Involving Certain Blocked Persons or Vessels;" Russia-related General License 92, "Authorizing the Offloading of Cargo from Sovcomflot Vessels;" and Russia-related General License 93, "Authorizing Transactions Involving Certain Sovcomflot Vessels."
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