The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on Thursday targeting two tanker owners involved in shipping Russian oil that exceeded the established price cap.
In a recent development, oil prices saw a remarkable surge, rising by 4% earlier today, following the United States’ decision to intensify sanctions against Russian crude exports.
According to reports, International benchmark Brent crude futures, set to expire in December, traded 3.9% higher, reaching $89.34 per barrel, while the front-month November US West Texas Intermediate crude futures rose 4.1% to trade at $86.28 per barrel.
Sanctions to Curb Russian Oil Profits
The surge in oil prices can be attributed to the US’s recent move to impose sanctions on two shipping companies accused of violating the G7’s oil price cap, a mechanism designed to maintain a steady supply of Russian crude oil while curbing the Kremlin’s financial resources.
To understand the significance of this move, it is crucial to track back to December 5th of the previous year when the Group of Seven (G7), Australia, and the European Union (EU) implemented a $60-per-barrel price cap on Russian oil.
This cap was designed to restrain Russia’s fossil fuel export revenue, which was believed to be contributing to its ongoing conflict in Ukraine. In a coordinated effort, the EU and the UK simultaneously imposed a ban on seaborne imports of Russian crude oil.
In a further escalation of measures, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on Thursday targeting two tanker owners involved in shipping Russian oil that exceeded the established price cap.
The YasaGolden Bosphorus tanker, which is owned by Turkey-based Ice Pearl Navigation Corp, was found to have transported Russian crude oil priced above $80 per barrel after the G7-imposed price cap came into effect. The other vessel, SCF Primorye, owned by UAE-based Lumber Marine SA, was noted for carrying Russian oil priced above $75 per barrel from a Russian port after the price cap mechanism was implemented.
Significance of the Sanctions on Oil Prices
These sanctions reflect the United States’ unwavering commitment to reducing Russia’s resources, which are instrumental in its military campaign in Ukraine, while also enforcing the established price cap.
“We remain committed to implementing a price cap policy that has two goals: reducing the oil profits upon which Russia relies to wage its unjust war against Ukraine and keeping global energy markets stable and well-supplied despite turbulence caused by Russia’s unprovoked invasion of Ukraine. We will continue to take actions to achieve these two goals,” said Deputy Secretary of the Treasury Wally Adeyemo.
In addition to these recent sanctions, the Price Cap Coalition has issued an advisory aimed at both governmental and private sector entities involved in the maritime trade of crude oil and refined petroleum products.
This advisory provides recommendations for best practices and highlights their commitment to promoting responsible practices in the industry, preventing and disrupting sanctioned trade, and enhancing compliance with the price cap.