In response to the mounting concerns surrounding the shadow trade in Russian oil and petroleum products, the Office of Foreign Assets Control (OFAC) has issued a Maritime Oil Industry Advisory, outlining risks and best practices for stakeholders involved in seaborne trade. This advisory comes in the wake of OFAC’s commitment to enforce the Price Cap Policy and its recent sanctions on companies participating in the shadow trade as reported by Foley Hoag.
- OFAC, in collaboration with the Price Cap Coalition, issues an advisory to combat the growing shadow trade in Russian oil and petroleum products, identifying risks and best practices for stakeholders.
- The advisory provides seven best practice recommendations for stakeholders, aligning with the Price Cap Policy’s diligence and certification requirements while not offering the same liability protection.
- OFAC’s efforts aim to enhance compliance with the Price Cap Policy and crackdown on bad actors violating it, as evidenced by the recent sanctions on two shipping companies involved in the shadow trade.
Responding to a Growing Shadow Trade
On October 12, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a Maritime Oil Industry Advisory in collaboration with the Price Cap Coalition to address the increasing “shadow” trade in Russian crude oil and petroleum products, a response to violations of Coalition sanctions.
The Risks of Sanctions Evasion
The Advisory outlines the risks associated with the shadow trade, categorizing them into four areas: maritime safety and the marine environment, insurance and economic risks, reputational, logistical, and financial risks, and legal and sanctions-related risks.
OFAC’s Best Practice Recommendations
The Advisory offers seven best practice recommendations for stakeholders involved in seaborne crude oil and petroleum product trading to mitigate these risks. These recommendations include obtaining proper maritime insurance, verifying classification society memberships, continuous AIS broadcasting, and due diligence on ship-to-ship transfers.
Aligning with the Price Cap Policy
The recommendations provided in the Advisory align with the Price Cap Policy, which sets a price cap on maritime transport of Russian oil. The Policy establishes a safe harbor process to avoid OFAC sanctions by complying with due diligence and recordkeeping procedures, which are detailed in the Advisory and OFAC’s guidance. However, the Advisory and the Policy serve distinct purposes in addressing the shadow trade issue.
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Source:Foley Hoag
