U.S. Imposes First Sanctions for Violations of Russian Oil Price Cap
The United States imposed sanctions on two shipping companies on Thursday for violating the oil price cap that the Group of 7 nations enacted to starve Russia of energy export revenue, the first such penalties that have been leveled amid growing concerns that the policy has been diminished by evasion and loopholes.
The sanctions were announced at a time of renewed anxiety about global energy prices following the attack by Hamas on Israel over the weekend that threatens to become a regional conflict. The price cap was put in place late last year to prevent Russia from benefiting from soaring energy prices by limiting its ability to sell oil using Western insurance and financing.
The cap was set so that Russian oil could not be sold using those services for more than $60 per barrel.
The Treasury Department imposed sanctions on Lumber Marine, a United Arab Emirates-based shipping company, for transporting crude oil priced above $75 per barrel from a Russian port after the cap was put in place. It also sanctioned Ice Pearl Navigation Corporation, a Turkish shipping company, for transporting Russian crude oil priced above $80 per barrel.
Being added to the U.S. sanctions list could disrupt both companies from participating in the global oil trade.
“Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” Wally Adeyemo, the deputy Treasury secretary, said in a statement.
The Treasury Department and the rest of the G7 have been closely watching how the oil markets have responded to the price cap. They have largely considered it to be successful because oil prices have not surged and officials believe that Russian oil profits have been eroded because the Kremlin has had to invest heavily to develop a “shadow” fleet of ships and alternative financial service providers.
The G7 and Australia, which is also part of the so-called price cap coalition, said in a joint statement that they were united in their work to enforce the cap.
“Where we have evidence that companies or persons have engaged in illicit or deceptive practices related to shipments of Russian-origin crude oil and petroleum products, we will respond,” the statement said.
U.S. officials have been warning shipping companies about potential violations. The Treasury Department described its action on Thursday as a new phase of enforcement of the price cap.
“We’re not going to tolerate evasion and we’re looking very closely at that,” Treasury Secretary Janet L. Yellen told The New York Times in an interview this week. “To the extent that there’s evasion, we certainly need to take action to deal with that and you should expect us to do so.”
