Price Cap Coalition Advisory for the Maritime Oil Industry and Related Sectors

The U.S. Department of the Treasury has published an advisory drawn up by the Price Cap Coalition (see comment box below) which contains best practices for the maritime oil industry in response to recent developments as regards activities to evade the price cap restrictions for the transport of cruide oil of Russian origin. Specifically, perpetrators have altered trade routes, engaged numerous different shipping service providers, and „established“ a „shadow“ trade characterized by irregular and high-risk practices associated with sanctioned entities or illicit activities. Such activities pose significant risks to the industry, related market segments, and governments, including safety, environmental, economic, reputational, financial, logistical, and legal risks.
Therefore, the advisory now is addressed at both government and private sector actors involved – directly or indirectly – in the maritime trade of crude oil and petroleum products. It thereby aims to promote responsible practices, prevent and disrupt sanctioned trade, and enhance compliance with price caps on Russian Federation-origin oil products imposed by the G7, the European Union, and Australia.
Specifically, the advisory sets out seven key recommendations firms and governments should adopt to achieve these goals. While most recommendations are addressed at the shipping industry, one appears to be relevant for financial market participants as well:
Recommendation 6 advises stakeholders to perform thorough background checks and research when dealing with ships, especially those that have undergone frequent administrative changes like re-flagging. Additionally, it suggests that extra caution should be exercised when dealing with intermediary companies, such as management companies, traders, or brokerages, which hide their ownership or engage in suspicious practices. These dubious companies are more likely to engage in deceptive actions that can increase risks for those involved. The level of due diligence should be adjusted based on the specific characteristics of each business and the associated risks. This is particularly crucial when market assessments indicate that Russian oil prices are higher than a price cap, and when Coalition services are in use or being considered.