U.S. threatens with fines for buying Russian oil not at the maximum price

American companies will be allowed to ship Russian oil if they buy it at or below the maximum price

The Office of Foreign Assets Control (OFAC) of the US Treasury has published preliminary guidance on the application of cap prices for Russian oil . It follows from it that those who buy Russian oil at prices above prohibitive prices may fall under US sanctions and penalties. Their level has not yet been determined.

“Persons who make significant purchases of Russian oil at a price above the limit, and at the same time intentionally use services related to the sea transportation of Russian oil, or persons who purposefully provide false information, false documents to service providers, may become objects of coercive measures in connection with in violation of the sanctions regime [including monetary fines],” the document says.

Under US law, sanctions violations can be punishable by fines of up to $331,000 per episode, and gross violations can be punished with a fine of up to $1 million or up to 20 years in prison.

The G7 has agreed on cap prices for Russian oil. What is important to know Business

At the same time, the United States will allow American companies to provide services related to the sea transportation of Russian oil (the list of such services will be published later - these may be insurance, brokerage services, refueling a vessel, etc.) if oil is sold at a price equal to or lower than limit.

Importers or refiners who wish to purchase Russian oil subject to the price caps (along with the appropriate transportation services) will need to provide the service providers with certain documentation proving purchases at or below the caps.

Economic agents of three levels will have to comply with the requirements for documentation and certification: those who have direct access to price information (commodity brokers, oil refiners) must store and, if necessary, submit invoices, contracts, invoices for verification to regulators; those who may sometimes ask for price information (banks) and those who do not have direct access to such information (insurers, P&I providers), the latter are advised to collect evidence from customers that they buy oil in accordance with marginal prices .

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With good faith compliance with the requirements for the collection of price information, service providers, such as insurers, will be exempt from the risk of legal liability if their customers falsify price documents or provide false data.

The ban on Russian oil imports to the United States remains in place, the document emphasizes. US authorities introduced it in March.

The G7 countries (G7: USA, Canada, UK, France, Germany, Italy and Japan) agreed to introduce a cap on Russian oil prices in early September. The purpose of the decision is the desire to reduce Russia's income and its ability to finance military operations in Ukraine. The price flow has not yet been determined, it is planned to be established by the time the EU sanctions against Russian oil come into force in December this year.

US officials have indicated that the price ceiling should be above the cost of Russian oil (so that Russian companies have incentives to export oil) and should be in line with historical prices accepted by Russia . In 2014-2019 (before the pandemic and the sanctions shock), Russian Urals oil cost a little over $60 per barrel on average, according to data from the Russian Ministry of Finance.

Deputy Prime Minister Alexander Novak called the G7 decision "complete absurdity" and interference in market mechanisms, and also said that in response, Russia could stop supplying oil and oil products to these countries.

Russian President Vladimir Putin has said that Western countries are "stepping on the same rake" as in the situation with Russian gas, and admitted that oil prices "will skyrocket".