If shipowners are acting in “good faith”, they have nothing to worry about when it comes to the price cap on Russian oil.

The cap, which is set to be implemented in December alongside the European Union’s ban on Russian crude oil, raised questions for the industry when it was announced this month, and even more when the US Department of the Treasury published guidance outlining an attestation system for ensuring compliance.

But speaking at Capital Link’s New York Maritime forum on Wednesday, Michael Lieberman, the assistant director for enforcement at the Treasury’s Office of Foreign Assets Control, said the process was set up to provide companies with a measure of protection when moving Russian oil.

“I just want to emphasise that the entire recordkeeping and attestation process is there to create a safe harbour for service providers from liability for the breach of sanctions in cases where they might inadvertently deal in seaborne Russian oil,” he said.

“For example, where a service provider without direct access to price information reasonably relies on a customer’s attestation, we’re not going to hold that service provider liable for any sort of sanctions breaches if they acted in good faith because of those who made material misrepresentations to them.”

Lieberman said the US envisages a three-tiered system, in which those with direct access to price information, such as commodities brokers or refiners, share documents proving the cap is being followed.

The second tier is actors that sometimes have access to the price information, including financial institutions or trade financiers, with the expectation that they should request, retain and share information on the oil price.

The third tier is made up of institutions such as insurers who typically do not have access to price information. They will be expected to collect attestations and write cap compliance into their policies.

Lieberman did not say what the attestations shipping companies will have to rely on would look like, though he did say so long as they are vetting their counterparties, they would not be at risk.

‘Can’t bury your head’

“You can’t bury your head in the sand,” he said.

Red flags requiring additional due diligence include many of the deceptive practices the US government detailed in a 2020 advisory to the industry, including a ship turning off its automatic identification system, or altered documentation.

Specific to these rules, he said red flags could include reticence to provide any price information at all, unusually favourable payment terms, opaque payment methods or requests to deal with newly formed intermediaries.

In the wake of the price cap announcement, Seward & Kissel attorney Bruce Paulsen — who moderated the panel — called it “perhaps the most complex sanctions regime I have ever seen”.

During the panel, Treasury senior advisor for Russia and Ukraine Erik Van Nostrand said the purpose of the price cap is to keep Russian oil flowing while preventing Moscow from profiting off sky-high energy prices that it could then use to fund the war against Ukraine.

He said the purpose is to create an exception in the EU’s crude oil ban, and that Moscow would be incentivised to participate, as G7 countries provide 90% of all maritime services to Russia.

Those countries would still not be buying Russian oil, but China, India, Turkey and developing countries would benefit from the lower prices.

Van Nostrand and Lieberman said the price cap will be determined at a later date, that it will be made public and is subject to adjustment.

The US Treasury building in Washington, DC. The Office of Foreign Assets Control is part of the department and is responsible for managing sanctions. Photo: Roman Boed/Creative Commons 2.0 Generic