# Factbox-U.S. offers new details on plan to cap Russian oil prices Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-24 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: New U.S. Treasury Guidance on Russian Oil Price Cap Meta Description: Get insights into the detailed plan to cap Russian oil prices starting Dec. 5, including key restrictions and exemptions. Stay informed with the latest URL: https://financedigest.com/factbox-u-s-offers-new-details-on-plan-to-cap-russian-oil-priceshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-23t170321z1lynxmpeiam0p3rtroptp4ukraine-crisis-russia-oil-1736814820030-compressed.jpg) (Reuters) -New guidance issued by the U.S. Treasury adds more detail to a complex plan by the European Union, G7 nations and Australia to cap the price of Russian oil starting on Dec. 5. Aiming to deprive Moscow of a war profit premium on its oil, the price cap [plan has for months left shipping services providers confused about what specific rules](https://www.financedigest.com/britain-plans-new-data-rules-to-ease-compliance-burden.html "Britain plans new data rules to ease compliance burden") they will need to abide by to avoid sanctions. The new guidance from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) answers a few key questions, including when the restrictions will take [effect and what types of scenarios and companies](https://www.financedigest.com/how-can-financial-services-companies-compete-more-effectively-in-times-of-uncertainty.html "How can Financial Services Companies compete more effectively in times of uncertainty?") will be bound by them. Crucially, though, the guidance does not yet state what the [price cap](https://www.financedigest.com/oil-prices-rise-after-opec-keeps-output-steady-russian-price-cap-imposed.html "Oil prices rise after OPEC+ keeps output steady, Russian price cap imposed") will be, something that the United States is still hashing out with its partners. However, the guidance made clear the cap would be on a free-on-board (FOB) basis, meaning the [costs of shipping](https://www.financedigest.com/amazon-other-retailers-revamp-free-shipping-as-costs-soar.html "Amazon, other retailers revamp ‘free’ shipping as costs soar"), freight, customs and insurance are not included. Here are key points from the latest guidance: START AND STOP While shipping and insurance are covered services, these costs are distinct from the [price cap on Russian oil,”](https://www.financedigest.com/oil-ticks-up-as-u-s-inflation-cools-but-prices-set-for-monthly-drop.html "Oil ticks up as U.S. inflation cools, but prices set for monthly drop") the guidance stated. Oil cargoes loaded before 12:01 a.m. EST (0501 GMT) on Dec. 5, and docking before Jan. 12, will not be covered by the [price cap](https://www.financedigest.com/eu-meets-to-try-to-break-gas-price-cap-impasse.html "EU meets to try to break gas price cap impasse") policy, OFAC said. This provides a grace period for cargoes purchased above the cap prior to Dec. 5 to reach their destinations on often long sea voyages. Any oil purchased or docked after those times, however, will need to adhere to the [price cap](https://www.financedigest.com/g7-finance-chiefs-agree-on-russian-oil-price-cap-but-level-not-yet-set.html "G7 finance chiefs agree on Russian oil price cap but level not yet set"). In addition, the [price cap only applies to the first “landed” sale](https://www.financedigest.com/musk-says-tesla-price-cuts-triggered-demand-2023-sales-could-hit-2-million-vehicles.html "Musk says Tesla price cuts triggered demand, 2023 sales could hit 2 million vehicles") outside of Russia, meaning the first point at which the cargo comes ashore. If the oil is resold on land after that point, it can be sold above the cap. The guidance makes clear, however, that if the cargo goes back out to sea without having been substantially transformed ashore outside of Russia – like having been refined into fuel – it [falls back under the price](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase") cap. [Oil certified as originating in another country but transiting through and offloaded from Russia](https://www.financedigest.com/oil-prices-steady-as-news-of-saudi-russia-meeting-calms-investors.html "Oil prices steady as news of Saudi, Russia meeting calms investors") would not be covered by the cap, OFAC said, citing Kazakh oil exports via the Caspian Pipeline Consortium (CPC) Black Sea terminal. [RUSSIAN IMPORTS](https://www.financedigest.com/indias-reliance-makes-rare-buy-of-russian-naphtha-ups-fuel-oil-imports.html "India’s Reliance makes rare buy of Russian naphtha, ups fuel oil imports") STILL BANNED IN U.S. The new guideline will not allow U.S. companies to import [Russian oil](https://www.financedigest.com/oil-gains-as-russian-supply-cuts-temper-concerns-over-rate-hikes-high-stocks.html "Oil gains as Russian supply cuts temper concerns over rate hikes, high stocks"), OFAC said, emphasizing that a U.S. [ban imposed in March after Russia’s invasion of Ukraine remains in effect](https://www.financedigest.com/eu-approves-effective-ban-on-new-fossil-fuel-cars-from-2035.html "EU approves effective ban on new fossil fuel cars from 2035"). But the guidance pointed out that U.S. trading [firms can be involved in sales to other destinations as long as they conform to the price](https://www.financedigest.com/investors-warn-big-consumer-firms-over-price-hikes-as-competitors-gain.html "Investors warn big consumer firms over price hikes as competitors gain") cap rules. In a [move which could also comfort some players in the global](https://www.financedigest.com/analysis-at-world-cup-saudi-crown-prince-moves-back-on-to-global-stage.html "Analysis-At World Cup, Saudi crown prince moves back on to global stage") shipping industry, the guidance further sketched out which types of companies would be obligated to participate in the cap plan. They include [trading and commodities](https://www.financedigest.com/a-brits-guide-to-understanding-commodity-trading.html "A Brit’s Guide to Understanding Commodity Trading") brokers, and companies involved in financing, shipping, insurance, flagging, and customs brokering. More tangential participants would not be covered by the policy, like those providing only insurance for crew members and their medical care, or inspection and pilotage of [oil tankers](https://www.financedigest.com/oil-spills-and-near-misses-more-ghost-tankers-ship-sanctioned-fuel.html "Oil spills and near misses: more ghost tankers ship sanctioned fuel"). Shippers had been concerned that pilots would be covered by the restrictions, which might have increased the chances for accidents in tricky waterways. (Reporting By Noah Browning; Editing by Marguerita Choy) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---