As Russia's war in Ukraine stretches into its tenth month, governments around the world continue to coordinate and respond with increasingly severe sanctions and export controls. 1  On December 2, 2022, the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States), the European Union, and Australia (the “Price Cap Coalition”)  announced a long-awaited agreement to set the maximum price for seaborne Russian-origin crude oil at US$60 a barrel, effective December 5, 2022. Simultaneous with the effective date of the price cap, the Price Cap Coalition banned a broad range of services—including maritime insurance and trade finance—related to the maritime transport (including the transport itself) of crude oil of Russian Federation origin (“Russian oil”) unless purchasers buy the oil at or below US$60 a barrel. Those who purchase Russian oil at or below the price cap will maintain access to a wide array of Price Cap Coalition country services that are vital to the oil trade.

As noted by U.S. Secretary of the Treasury Janet Yellen, in a comment echoed by EU Commission President Ursula von der Leyen and UK Chancellor Jeremy Hunt, the price cap is intended to encourage the flow of discounted Russian oil into global markets and keep global energy markets stable, while also reducing Russia's revenues used to fund the war on Ukraine. 2  Concurrently with this agreement, sanctions authorities in the United States, European Union, and United Kingdom issued or clarified their guidance on the implementation of the oil price cap and expectations for participants in the maritime global oil market. The U.S., EU, and UK guidance is largely consistent but―as with any novel sanctions action―certain discrepancies and open questions remain. In  announcing the price cap, the Price Cap Coalition “underscore[d] [its] firm intention to harmonize the implementation of the price cap across our jurisdictions to the maximum extent possible, minimizing complexity and burdens for market actors.” The implementation of the price cap does not alter the Russian oil import prohibitions previously enacted by the U.S. EU, and UK

For its part, the Russian Federation  has indicated that it will not sell oil to countries complying with the price cap and will reduce its oil output, if necessary. The Russian opposition, the failure of other key oil importer countries to agree to the price cap, and the novel nature of this type of sanctions mechanism, has left market participants skittish about how to implement the price cap, avoid sanctions evasion, and respond to any price fluctuations as a result of the cap.

This alert summarizes implementation of the Russian oil price cap, including the guidance and compliance expectations of the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), the European Commission, the UK HM Treasury's Office of Financial Sanctions Implementation (OFSI), and Japan. 

Adoption of the Price Cap Policy

As  announced on September 2, 2022, in an attempt to maintain a reliable supply of oil to the global market while reducing the revenues the Russian Federation earns from oil, the Price Cap Coalition agreed to implement a “price cap policy.” The aim of the price cap policy is to significantly weaken Russia's economic base, deprive it of critical technologies, and significantly curtail its ability to access international capital markets to finance its war in Ukraine, while also allowing for a reliable supply of oil to the global market. 

The price cap policy has two components: (1) a ban on certain services related to maritime transportation of Russian crude oil (effective December 5, 2022) and petroleum products (effective February 5, 2023); and (2) an exception for services provided in relation to shipment of such seaborne oil and petroleum products purchased at or below a certain price cap. The implementation of the price cap for Russian crude dovetails with the UK's and EU's respective embargos on seaborne Russian crude, both effective December 5, 2022, and does not affect any existing sanctions imposed by participating countries such as the pre-existing U.S. ban on importation of Russian oil. 

On December 2, 2022, after protracted discussions, the EU Member States unanimously agreed to set the price cap level at US$60 a barrel. U.S. Secretary of the Treasury Janet Yellen  had suggested in October that a US$60 barrel cap would be reasonable, noting that Russia would likely be able to continue to make some profit (and therefore be incentivized to sell despite the cap) at that price.  Reporting suggests that the current market price of Russian crude is around US$65 a barrel. Ukraine  had advocated for a far lower cap of around US$30-40 a barrel. After the EU Member States coalesced around US$60, however, the rest of the Price Cap Coalition promptly agreed to proceed at that level, consistent with U.S. Treasury Deputy Secretary Wally Adeyemo's statement that the intent was “to set the price cap above Russia's marginal cost of production” so that Russia would be inclined to agree to sell at the US$60 a barrel price. EU Member States pushing for a far lower level secured an agreement to review the price cap every two months from January 2023 onward, with the goal of setting the cap at least 5% below Russia's market barrel price. 3  The Price Cap Coalition  will take into account a variety of factors when reviewing the price, including “the effectiveness of the measure, its implementation, international adherence and alignment, market developments, and the potential impact on coalition members, and partners, including low- and middle-income countries.” 4  

The Price Cap Coalition has not yet determined the maximum prices for Russian-origin petroleum products (one for high-value and one for low-value refined products), but  reiterated that it intends to announce those caps separately and prior to the implementation of the ban on related services on February 5, 2023.

OFAC Price Cap Implementation and Guidance

Scope of Covered Services.  Effective December 5, 2022, the following Covered Services  related to maritime movement of Russian oil are prohibited under an OFAC  determination, pursuant to Executive Order 14071, unless that oil is purchased at or below the relevant price cap. 5

  • Trading/commodities brokering. Buying, selling, or trading oil or doing so for others.
  • Financing.  Committing to provide or disburse any economic resources of any nature, exclusive of processing or clearing payments as an intermediary.
  • Shipping Owning, operating, chartering, or sub-chartering a vessel for the purposes of carrying cargo; brokering the same; or serving as a shipping or vessel agent.
  • Insurance. Providing insurance, reinsurance, and protection and indemnity services; dealing with related claims; or otherwise assuming the risks associated with existing insurance policies.
  • Flagging.  Registering or maintaining registration of vessels (but not deflagging of vessels transporting Russian oil sold above the price cap).
  • Customs brokering Assisting importers and exports in meeting requirements governing exports and imports (this does not include legal services or assisting importers and exporters that meet the U.S. sanctions compliance requirements).

The determination applies from the embarkment of maritime transport of Russian oil (e.g., when the crude oil is sold by a Russian entity for maritime transport) through the first landed sale in a jurisdiction other than the Russian Federation (through customs clearance). Crude oil loaded before December 5, 2022 remains outside the determination if it is unloaded at its port of destination by January 19, 2023. 

Safe Harbors.  OFAC sets out a series of exceptions and safe harbor provisions in its updated “Guidance on Implementation of the Price Cap Policy for Crude Oil of Russian Federation Origin” (the “ OFAC Guidance”).

  • Exception for intermediary services.  The processing, clearing, and sending of payments by intermediary banks is explicitly carved out, as are services with respect to foreign exchange transactions and the clearing of commodities futures contracts. General License 8D also continues to authorize certain energy-related transactions involving certain designated Russian financial institutions. This exception may prove to be narrower than intended, unless clarified, as it remains unclear how this will work in practice where financial institutions offer correspondent clearing or other intermediary services and are thus exposed to trade finance transactions that may not comply with the oil price cap.
  • Substantial transformation.  Crude that “substantially transformed” (under the long-standing use, name, or character test) is no longer subject to the price cap, even where subsequently exported by maritime transport. 6  Blending alone is not a substantial transformation. 
  • A safe harbor from strict liability, absent knowledge or reason to know.  OFAC offers a safe harbor for Covered Services that are provided in good faith in compliance with OFAC's expectations for three tiers of actors, including recordkeeping and attestation requirements. The OFAC Guidance includes a sample attestation. The “safe harbor” requirement varies by a service provider's “tier”, as follows 7 :
    • Tier 1 Actors, such as commodities brokers and traders, that have direct access to price information, are required to retain that price information and provide information (e.g., invoices, contracts, receipts, proof of payment)/attestation to Tier 2 or Tier 3 actors as needed. OFAC recommends that Tier 1 actors update the terms and conditions of their contracts, update their invoice structure to include an itemized price for oil purchase (excluding shipping, freight, customs, and insurance costs), and provide guidance to their staff.
    • Tier 2: Actors, such as financial institutions providing trade finance, customs brokers, and ship/vessel agents, that are sometimes able to request price information, are required to request and retain price information (to the extent practicable) or attestation from Tier 1 or customer/counterparty (when direct receipt of price information is not practicable). Examples of information to be requested and retained includes invoices, contracts, receipts/proof of payment, and price cap attestations. OFAC recommends that Tier 2 actors provide guidance to trade finance department/relationship managers/compliance staff, and update their requests for information or sanctions questionnaire templates. OFAC states that financial institutions providing non-transaction specific financing should also implement appropriate and reasonable risk-based policies and procedures to confirm that the price does not exceed the relevant price cap. Further, financial institutions must obtain and retain signed attestations from their downstream customers or subcontractors that, for the service being provided, the Russian oil was or will be purchased at or below the relevant price cap to be afforded the safe harbor.
    • Tier 3 Actors, such as insurers, reinsurers, Protection and Indemnity (P&I) clubs, ship owners/carriers, and flagging registries, that do not have direct access to price information, are required to receive attestation from Tier 1 or Tier 2 actors or their customer/counterparty regarding compliance with the price cap. Examples of documentation include an exclusion clause within a policy, a clause within a policy that excludes coverage for activities related to the maritime transport of Russian oil purchased above the price cap, and price cap attestations. OFAC recommends that Tier 3 actors update their policies and terms and conditions to reflect these requirements and provide guidance to their staff.
  • Diligence Expectations.  OFAC expects U.S. service providers to continue to implement and perform risk-based due diligence practices, consistent with industry standards. 8  The OFAC Guidance explains that: “OFAC would not pursue a penalty against a U.S. service provider that reasonably relies on the documentation or attestations [], unless the U.S. provider knew or had reason to know that such documentation was falsified or erroneous or that the Russian oil was purchased above the relevant price cap.” 9  Instead, OFAC will focus its enforcement energy on actors who willfully violate the price cap. In order to avoid running afoul of the safe harbor, actors across the supply chain should consider updating their sanctions compliance and due diligence procedures to account for the determination requirements and train their personnel on their related roles and responsibilities. 

EU Commission Price Cap Implementation and Guidance

After the EU Member States reached a formal agreement on the US$60/barrel price cap on Russian seaborne oil on December 2, 2022, the EU Council adopted amending regulations to its EU Russia sanctions regime on December 3, 2022 to  introduce the agreed price cap and further  adjust provisions on the ban on maritime transport and services for Russian oil. Further, the EU Commission issued extensive  guidance on the oil price cap (the “EU Guidance”) for national authorities, EU operators, and citizens, to explain the implementation and interpretation of the oil price cap. The EU Guidance is non-binding, and the EU Member States are ultimately responsible for implementing and enforcing EU sanctions. However, the national authorities enforcing the oil price cap at the EU Member State level will (at least largely) follow, and economic operators are expected to take into account, the EU Guidance to achieve the uniform application of the maritime services ban and oil price cap across the EU.

In many aspects, the newly adopted EU rules and the EU Guidance mirror the rules and guidance issued by OFAC and OFSI. This applies to the scope of covered services and safe harbor provisions (including a general carve-out for the processing, clearing, and sending of payments by intermediary banks and for substantial transformations of Russian crude). In particular, the recordkeeping and attestation obligations of Tier 1, Tier 2, and Tier 3 service providers to ensure safe harbors for their covered services provided in good faith are closely aligned with the OFAC and OFSI requirements. 10

There are some nuances in the details: For example, the EU Guidance, different from the OFAC Guidance, does not expressly refer to ship/vessel agents as Tier 2 actors, but mentions ship management companies as an example of Tier 3 actors. 11  Further, the EU Guidance is less specific with respect to due diligence recommendations of the different service providers, but generally notes that the recordkeeping and attestation process is in addition to appropriate “standard due diligence.” 12  In particular, Tier 3 providers (who do not have direct access to price information) are “required to do the necessary due diligence such that it would be reasonable to rely on the attestation they have been provided by their customer.” 13  Like under OFAC rules, the EU introduced a record retention period of five years for service providers 14  and does not provide for reporting requirements of market participants in relation to the oil price cap. 15

In the following sections, we set out a few specific aspects of the implementation of the price cap at the EU level which have (so far) not been adopted by the United States or United Kingdom.

Scope of Restrictions and Covered Services.  The following restrictions under EU sanctions are currently not included in the U.S. and UK provisions:

  • The EU provides for a “tainted vessels” provision: In the event that a vessel (including any non-EU vessel registered in a third country) has transported Russian crude oil or petroleum products, and the operator responsible for the transport knew or had reasonable cause to suspect that such crude oil or petroleum products were purchased above the oil price cap on the date of conclusion of the contract, it is prohibited to provide maritime transport and services relating to the transport of Russian crude oil or petroleum products (even if purchased below the price cap level) by that vessel for 90 days following the date of unloading of the cargo purchased above the price cap. 16
  • The EU separately prohibits technical assistance in relation to the maritime transport of Russian oil above the oil price cap. 17  “Technical assistance” is defined to include “any technical support related to repairs, development, manufacture, assembly, testing, maintenance, or any other technical service, and may take forms such as instruction, advice, training, transmission of working knowledge or skills or consulting services, including verbal forms of assistance.”

Procedural aspects.  The EU, like the U.S. and the UK, provides for a transition period for Russian crude oil being loaded onto a vessel at the port of loading prior to December 5, 2022, and unloaded at the port of destination prior to January 19, 2023. However, the EU allows for an extension of the January 19 transition period beyond 45 days in case of proven force majeure events (e.g., storm, port or straits blockade). 18  Regarding future amendments of the oil price cap, the EU provides for a wind-down period of 90 days from the date of entry into force of each new cap, provided that the maritime services in question are based on a contract concluded before that date and the purchase price did not exceed the oil price cap applicable on the date of conclusion of that contract. 19

Further Development of Oil Price Cap.  The EU has determined that the functioning of the price cap mechanism must be reviewed as of mid-January 2023 and every two months thereafter. 20  To achieve the objectives of the price cap, including its ability to reduce Russia's oil revenues, the EU has committed to ensuring that the price cap level remains at least 5% below the average market price for Russian oil and petroleum products, calculated on the basis of data provided by the International Energy Agency. 21

OFSI Price Cap Implementation and Guidance

In the UK, the Russia (Sanctions) (EU Exit) (Amendment) (No 16) Regulations 2022 (SI 2022/1122) prohibits, from December 5, 2022, the supply or delivery by ship of Russian oil (and, from February 5, 2022, Russian oil products) and the financial services, funds and brokering services required to facilitate that supply or delivery. Exceptions to the prohibitions relating to Russian oil are contained in general licenses issued by OFSI on December 4, 2022 (“ OFSI General Licenses”), which permit otherwise prohibited activities in accordance with the oil price cap policy.

Enforcement Approach.  In line with OFAC and the EU Commission, OFSI issued non-binding  guidance (the “OSFI Guidance”) on the implementation of the oil price cap, including its due diligence expectations and a statement that―similar to the “safe harbor” offered by OFAC and the EU―OFSI does not anticipate taking enforcement action against those able to demonstrate compliance with the attestation procedure and show that they have undertaken adequate due diligence. Nonetheless, as in the United States, a breach of the UK regulations gives rise to a strict liability civil offense and also carries the risk of criminal prosecution.

Scope of Restrictions and Covered Services.  As explained above, the UK regime is closely aligned with the U.S. and EU regimes with respect to covered services, carve-outs for the processing, clearing, and sending of payments by intermediary banks, and substantial transformations of Russian crude.

Procedural Aspects.  Similar to the U.S. and EU, the UK oil price cap program contains attestation obligations of Tier 1, Tier 2, and Tier 3 service providers. Those relying on the oil price cap exemption must keep records, although the UK retention period is four years beyond the end of the calendar year in which the record was created. Like the U.S. and EU, the UK allows for a transition period where Russian oil loaded onto a vessel at the port of loading prior to December 5, 2022, and unloaded at the port of destination prior to January 19, 2023, is excluded from the prohibitions.

Reporting Requirements.  Unlike the EU and U.S., the UK oil price cap regime places certain reporting requirements on persons who are involved in the covered services. These include:

(i) reporting to HM Treasury as soon as practicable if, in the course of business, they know or have reasonable cause to suspect a person is a designated person or has committed an offense; 22  and (ii) reporting to OFSI each time they undertake activity in reliance on an OFSI General License. The reporting requirements vary between Tier 1, Tier 2, and Tier 3 entities. A Tier 1 entity is required to report to OFSI within 40 days of each activity they undertake which is purported to be permitted when using an OFSI General License. This includes instances where several activities or occurrences of activities are covered under a single contract. A Tier 2 or Tier 3 entity relying on an attestation directly from a UK Tier 1 entity is required to ask and receive confirmation that the Tier 1 entity has reported to OFSI as described above (quarterly for Tier 2; periodically for Tier 3 in line with the requirements). Where they do not receive this confirmation, the Tier 2 or 3 entity is required to inform OFSI and withdraw their services as soon as reasonably practicable. Where a Tier 2 or Tier 3 entity is transacting with a non-UK Tier 1 entity and it is not able to obtain an attestation, this must also be reported to OFSI.

Japan Price Cap Implementation and Guidance

Japan has implemented the price cap through official notices issued on December 5, 2022, by its Ministry of Foreign Affairs, Ministry of Finance, and Ministry of Economy, Trade and Industry. 23  A key distinction involving Japan is that the price cap will not be imposed on oil supplied to Japan from the Sakhalin-2 project in the Russian Far East, in which Japan has a significant interest. Also, the G7 and allied countries have agreed that providing reinsurance services for shipments of oil from Sakhalin-2 to Japan would not be subject to sanctions, even if the price is above the cap.

The permission of the Minister of Finance is required for purchases of Russian oil (other than those supplied from Sakhalin-2) above the price cap. In addition, all imports of Russian oil into Japan must be confirmed by the Minister of Economy, Trade and Industry, even if the oil is priced below the cap, or is supplied from Sakhalin-2. Residents of Japan are also restricted from providing shipping, customs clearance, finance, and insurance services to non-residents in relation to the purchase of Russian oil above the price cap.

The Japanese government has indicated that it would use the same Tier 1 / Tier 2 / Tier 3 categories as OFAC and OFSI, and has provided links to their websites for additional information.


While Russia continues its bloody invasion of Ukraine, governments around the world will continue to increase pressure on the Putin regime through new and unprecedented sanctions and export controls. This oil price cap is one of the more novel sanctions measures attempted so far, and it remains to be seen how workable and successful this mechanism will prove in practice. As more sanctions are imposed and implementation and enforcement trends develop, Morrison Foerster's National Security practice stands ready to assist you in navigating this complex and ever-evolving landscape.


1. For additional detail regarding prior sanctions developments, please refer to our previous client alerts dated Feb. 28, Mar. 22, and Apr. 18, 2022.

2. U.S. Dep't of Treasury, Statement by Secretary of the Treasury Janet L. Yellen on the Announcement of the Price Cap  (Dec. 2, 2022);  EU Commission, G7 agrees oil price cap: reducing Russia's revenues, while keeping global energy markets stable  (press release of Dec. 3, 2022);  UK Government, UK and allies announce price cap of $60 on Russian Oil (press release of Dec. 2, 2022).

3. See the new Article 3n of Regulation (EU) No 833/2014 (as amended).

4. In case of a revision of the price, the Price Cap Coalition anticipates including a form of grandfathering to allow for transactions that were concluded prior to the revision in compliance with the previous maximum price.

5. On December 5, 2022, Secretary Yellen signed an additional  determination implementing the agreed upon US$60 a barrel price cap.

6. OFAC Guidance at 3-4.

7. OFAC Guidance at 7-9.

8. OFAC Guidance at 3-4.

9. OFAC Guidance at 10.

10. Section 7 of the EU Guidance: Attestations and recordkeeping.

11. FAQ 35 of the EU Guidance.

12. FAQ 35 of the EU Guidance.

13. FAQ 38 of the EU Guidance.

14. FAQ 43 of the EU Guidance.

15. FAQ 44 of the EU Guidance.

16. Art. 3n (7) of Regulation (EU) No. 833/2014 (as amended).

17. Art. 3n (1) and Art. 1 (c) of Regulation (EU) No. 833/2014 (as amended).

18. FAQ 12 of the EU Guidance.

19. Art. 3n (5) of Regulation (EU) No. 833/2014 (as amended).

20. Art. 3n (11) of Regulation (EU) No. 833/2014 (as amended).

21. Art. 3n (11) of Regulation (EU) No. 833/2014 (as amended).

22. This reporting requirement includes notifying the HM Treasury when such persons become aware of a transaction for shipping or associated services where prices deviate significantly from the standard prices available in the market at that point in time. This is to avoid the costs of shipping and other services relevant to the transit of oil and oil products to be used as a route for circumvention of the cap.

23. The Japanese government has issued a detailed  FAQ document for the Russian oil price cap system, but it is currently only available in Japanese.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved