An announcement from HM Treasury on Friday confirmed that the price cap will be enforced in the UK from today – 5 December 2022 – and across coalition jurisdictions.
Third countries will only be able to access services such as insurance, shipping and brokerage from Coalition countries if they trade Russian oil at or below the cap.
The UK and its coalition partners will not make use of the cap, as they have already introduced an import ban on Russian oil.
Maintains affordable supply
The UK, in partnership with the G7 countries, Australia and the European Union, agreed on Friday to set the $60 price cap on Russian crude oil traded by firms shipping oil to third countries with the price to be kept under review. The UK and its coalition partners will only provide services facilitating the maritime transport of Russian oil if firms trade at or beneath this cap.
G7 finance ministers agreed to a cap in September as a way of undermining Putin’s ability to fund war in Ukraine through inflated global oil prices, while ensuring that third countries can continue to secure affordable oil.
A General Licence will be published shortly that will provide an Oil Price Cap exception for third countries, so that firms supplying oil to them are able to continue accessing services from Coalition countries after today, but only if trading Russian oil at or below the cap.
UK leads on insurance provision
Insurance is one of the key services that enables the movement of oil by sea, particularly protection and indemnity (P&I) insurance which relates to third-party liability claims – the UK is a global leader in the provision of P&I cover, writing 60% of the global cover written by the International Group of the P&I clubs.
Measures on services that facilitate the maritime transportation of refined oil products will come into force on the 5th February, to align with EU timelines for a parallel measure.
Clamp down on war funding
Chancellor Jeremy Hunt said: “The UK will stand with Ukraine and her people for as long as Putin’s war continues. We will not waver in our support and we will continue to look for new ways to clamp down on Putin’s funding streams wherever we can.”
United States Secretary of the Treasury Janet Yellen said: “Together, the G7, European Union, and Australia have now jointly set a cap on the price of seaborne Russian oil that will help us achieve our goal of restricting Putin’s primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies. Today’s announcement is the culmination of months of effort by our coalition, and I commend the hard work of our partners in achieving this outcome.”
To enforce the scheme the Treasury has set up a new team, based in the Office of Financial Sanctions Implementation. This team will set up the licensing and enforcement system for the Oil Price Cap; engage with industry to ensure readiness for the cap; and monitor the level and impact of the cap on an ongoing basis.
General guidance on the operation of the UK ban and cap was published on 14 November and will be updated on 4 December – this is being followed up with a programme of industry engagement events and opportunities.