The United States has imposed sanctions on two shipping companies for violating the oil price cap enacted by the Group of 7 (G7) nations to limit Russia’s energy export revenue. These are the first penalties to be imposed amid concerns that the policy has been undermined by evasion and loopholes. The sanctions come at a time of heightened global energy price anxiety following the recent conflict between Hamas and Israel, which threatens to escalate into a regional conflict. The price cap was introduced to prevent Russia from benefiting from soaring energy prices by restricting its ability to sell oil using Western insurance and financing.
The Treasury Department sanctioned Lumber Marine, a United Arab Emirates-based shipping company, for transporting crude oil priced above $75 per barrel from a Russian port after the implementation of the price cap. Furthermore, Ice Pearl Navigation Corporation, a Turkish shipping company, was sanctioned for transporting Russian crude oil priced above $80 per barrel. Being added to the U.S. sanctions list could disrupt these companies’ participation in the global oil trade. Wally Adeyemo, the deputy Treasury secretary, stated that these actions underscore the commitment to reduce Russia’s resources for its war against Ukraine and enforce the price cap.
The success of the price cap has been monitored by the Treasury Department and the rest of the G7, who believe it has been effective in preventing oil price surges and eroding Russian oil profits. They assert that the Kremlin has had to invest heavily in developing a “shadow” fleet of ships and alternative financial service providers. The G7 and Australia, part of the coalition supporting the price cap, have expressed their unity in enforcing it. They vowed to respond to evidence of any illicit or deceptive practices related to shipments of Russian-origin crude oil and petroleum products. U.S. officials have been warning shipping companies about potential violations, and the Treasury Department is now entering a new phase of enforcement.
Treasury Secretary Janet L. Yellen emphasized the intolerance for evasion and stated that action would be taken to address any such violations. The U.S. intends to closely scrutinize evasion and is determined to deal with it firmly. The enforcement of the price cap signals the U.S. government’s commitment to curbing Russian resources for its conflict with Ukraine.
