New Russia Price Cap Alert Offers Guidance on Responding to Evasion
A new alert published by the countries behind the Russian oil price cap outlines a set of “key” cap evasion tactics and how to identify and report them. It also details several red flags and stresses that vessel owners, insurers and other service providers need to conduct due diligence to make sure they’re not helping others violate the cap.
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Service providers should look out for falsified attestations, “opaque” costs in shipping documents and complex and “irregular corporate structures,” the alert said, which may signal that the shipment contains oil traded above the price cap. Some members of the oil shipping industry will soon be required to comply with new price cap attestation and recordkeeping rules (see 2312200031) -- including by collecting and sharing itemized insurance and freight costs with any party further down the supply chain -- and the alert said industry should be wary of any parties that don’t itemize these costs.
The alert also said those prices should be at “commercially reasonable rates, in line with industry standards, including any geopolitical risk premiums.” Billings of “commercially unreasonable or opaque shipping and ancillary costs should be viewed as a sign of potential [oil price cap] evasion.”
The coalition countries, which include the U.S., Canada, the U.K., the EU and others, warned industry to “undertake appropriate due diligence of customers and counterparties across the supply chain,” adding this is “especially important” if there are red flags. If “business intelligence, information, or market assessments indicate that Russian oil or oil product prices exceed the price cap,” companies shouldn’t go through with the sale or service.
More due diligence may be needed for ships that have gone through “numerous administrative changes” -- such as constant re-flagging or ownership changes -- or when they involve intermediary companies such as brokerages that hide their actual ownership, the countries said. They also encouraged industry to keep track of vessels and companies that comply with the cap, which could help “inform an internal ‘whitelist’ of entities considered ordinarily compliant.” But the alert also said those risk profiles can change, and “entities on any such whitelist should be regularly reviewed.”
The alert also recommends that industry report any ship suspected of being part of a shadow fleet -- which typically include older ships with false registrations being used to transport sanctioned goods (see 2310240068) -- or if they notice “voyage irregularities,” which may signal evasion. The last two pages of the six-page alert includes information on how companies can report violations to each member of the price cap coalition.