UK Prohibits Services Enabling the Transport of Russian Oil Above Price Cap

The UK government announced legislation on Nov. 3 saying “it will prevent countries from using the UK’s services to transport Russian oil unless it is purchased at or below the Oil Price Cap set by the Price Cap Coalition of the G7 and Australia.” Legislation introduced on Thursday sets a ban on UK ships and services facilitating the maritime transport of Russian crude oil from Dec. 5, the date EU’s embargo on Russian seaborne crude oil imports commence.

“The ban on services, including insurance, brokerage and shipping, will be coupled with a General Licence, expected shortly, that lays the basis for an Oil Price Cap exception that will allow third countries to continue accessing services only if purchasing Russian oil at or below the cap. The level of the price cap will be set by the coalition in due course,” the UK government said in a statement.

The UK has global dominance in the provision of protection and indemnity (P&I) cover, writing 60% of global cover.

“Today’s legislation on crude oil will come into force on 5th December with further measures on refined oil products coming into force on the 5th February, to align with EU timelines for a parallel measure,” the government statement said.

The G7 group of developed economies had agreed to finalize a price cap on Russian oil, in a bid to hamper Russia’s funds to be used in its invasion of Ukraine. The G7 will ban maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap, which is expected to be determined soon.

European Union ambassadors also endorsed the price cap after reaching an agreement to impose a new package of sanctions on Russia.

Still, there are doubts if the G7’s price cap plan will serve its dual purpose of cutting Moscow’s revenues while keeping Russian oil in the global market, especially because top importers China and India have not signed in, and because Putin could make good on his promise to cut all energy supplies, including crude, fuels, natural gas, and coal, to the countries that sign up to cap the price of Russian oil.

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