Russian oil companies banned from complying with price cap

From 1 February, Russian oil companies are banned from selling oil and petroleum products ‘if the text of a contract contains the price cap conditions set by the G7 countries.’

So reports the independent Russian Interfax information service, which says that the ban is consonant with the decree signed by President Putin at the end of 2022 ‘in response to the implementation of the price cap by the G7 countries.’ The cap stipulates that companies from the G7 countries and the European Union are permitted to ship Russian oil and petroleum products, as well as provide services related to their seaborne transportation, only if such products are sold at no more than $60 per barrel for oil.

Interfax adds that ‘It is expected that [a corresponding price cap for petrol] will be set before February 5, when the embargo on the importation of Russian petroleum products by EU countries enters into force.’

It notes, ‘The presidential decree is valid until July 1, 2023, and it applies at all stages of supplying to the end buyer. Regular monitoring for compliance with the decree is entrusted to the Energy Ministry. Meantime, Putin can make exceptions to the ban based on a special decision. Prime Minister Mikhail Mishustin has already signed a resolution that defines the rules for monitoring the implementation of the decree. Consequently, the companies themselves and individuals that have concluded supply contracts are obliged not to allow the presence of price cap provisions in contracts and addendums to them. Companies must also ensure that non-application of price cap is monitored all the way to the end buyer.’