The Price Cap on Russian Oil
Download the full circular: The price cap on Russian oil - Circular issued by International Group clubs
- The EU, G7 and Australia (the “Price Cap Coalition”) has recently introduced legislation and guidance effective 5 December 2022 intended to maintain the supply of Russian oil to world markets whilst at the same time reducing Russia’s earnings from its oil exports (the “Price Cap Scheme”).
- Under the Price Cap Scheme, IG P&I Clubs will now be able to provide P&I cover for Russian crude oil shipments to countries which are not part of the Price Cap Coalition provided that the price of the Russian crude oil cargo from the time it is loaded until it has cleared customs at the port of destination is at or below $60 per barrel (the “Price Cap”).
- A separate price cap will be introduced on 5 February 2023 for Russian petroleum products.
- Ships with Russian crude oil on board on the 5 December commencement date may continue to lawfully perform the voyage even if the cargo has been sold at a price above the Price Cap if the voyage will be completed and the cargo off loaded by 19 January 2023.
- Clubs, shipowners and charterers will now be required to check the price of Russian oil cargoes on board ships they own, charter or insure. These checks will take the form of contractual attestations provided by their contractual counter parties stating that for the relevant period the price will not exceed the Price Cap.
- A Shipowner or Charterer that intends to transport Russian crude oil cargoes after 5 December will now need to provide its P&I Club with an attestation that it will not for the duration of the period of insurance carry Russian oil cargoes which have been sold at a price that for the period it is on board the vessel has exceeded the Price Cap. The attestation Clubs require is at Annex II to this circular.
- Additionally, Shipowners and Charterers currently engaged in trades involving the carriage of Russian crude oil that commenced prior to 5 December 2022, but which will be completed by 19 January 2023 will need to complete a separate attestation. The attestation Clubs require is at Annex I to this circular.
- Club cover for the carriage of Russian crude oil loaded after 5 December 2022 and petroleum products loaded after 5 February 2023 is dependent on Members complying in full with the requirements of the price cap schemes, including the provision of appropriate attestations. Clubs will be required to withdraw cover where there are reasonable grounds to suspect that the cargo being carried has been purchased at a price greater than the price cap.
All clubs in the International Group have issued a similar circular.