US imposes first sanctions for undermining Russia oil export price ceiling agreed by G7
Photo: Cengiz Tokgöz / VesselFinder

The United States of America introduced sanctions for the first time in response to the circumvention of price restrictions against Russian oil, announced OFAC, the sanctioning unit of the US Treasury Department, on Thursday.

The shipping company Lumber Marine SA from the UAE and the Turkish Ice Pearl Navigation Corp have been sanctioned.

Lumber Marine was caught transporting Novy Port Russian Arctic oil using the SCF Primorye at a price of $75 per barrel, while the Turkish company owns the Yasa Golden Bosphorus tanker, which was carrying ESPO oil at a price of $80 per barrel.

Both vessels used the services of American companies.

The price ceiling agreed by the G7 coalition and Australia is set at $60 per barrel.

Appearance on the US sanctions list creates obstacles for both companies to participate in the global oil trade.

"Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap," Wally Adeyemo, the US deputy treasury secretary, said in a statement.

From December 5, 2022, the G7 states banned their companies from providing services, such as transportation or insurance, for the sea transportation of Russian oil if it sells for more than $60 a barrel. Since then, the price ceiling has never been revised.

At first, the program worked as it should. The US Treasury Department said the sanctions would accomplish their stated goal of limiting Russia's revenues, but in a way that would not have a negative impact on the global oil market.

However, from the summer of 2023, the mechanism began to lose its effectiveness, and the average price for the main export grade of Russian oil, Urals, broke through the price ceiling. By the end of the summer, three-quarters of Russian oil was sold for more than $60 per barrel, and by October, the price of Urals had almost equaled the price of the benchmark Brent grade.

Russia's oil revenues in August rose to the maximum since the fall of 2022.

The cost of oil in the world is rising, and experts say that it is only a matter of time when its price will return to the level of $100 per barrel.