2 Shipping Companies Face US Sanctions for Shipping Russian Oil
Two shipping companies have been penalized and are facing sanctions for transporting Russian oil in violation of a multinational price cap. The US Treasury Department said an Emirates-based company Lumber Marine and Turkey-based Ice Pearl Navigation shipped Russian oil at $75 and $80 a barrel, respectively.
A senior Treasury official said Russia tried to build an alternative shipping network to avoid the multinational price cap. He explained the US government has usually contacted a ship’s flagging nation and insurer if there is any violation, or suspected violation leading to the ship losing access to insurance or a country’s registration.
Russia finds the price cap expensive, while the US says it has been successful. The high prices make it harder for Russia to fund its war in Ukraine while keeping energy costs down for consumers and businesses around the world.
US Sanctions and Price Cap Effective
The Biden administration says the price cap has been successful. It has brought a 45 percent drop in Russian oil tax revenue. The US Treasury official said the focus of enforcing the cap will be on further increasing costs for Russia’s oil industry.
The US and its allies devised the price cap to deprive the Kremlin of revenue to fund its special operation in Ukraine, and force the Vladimir Putin-led government to sell its oil at a discount or divert money for a costly alternative shipping network. The G7 and Australia aligned with the EU to ban services related to the movement of Russian oil and petroleum products, unless they were purchased below a price cap.
Companies based in the mentioned coalition countries can continue providing maritime services for transport of Russian oil. However, there is a condition. The oil has to be sold at or below the price cap level. If Russian exporters or importers of Russian oil want access to the coalition countries’ service providers, Russia must sell the oil at or below the price cap level.
Russian Oil Revenue Has Fallen
The price cap has proved costly for Russia. The Kremlin’s oil revenues have sunken substantially compared to both pre-war levels, and the elevated level at the onset of the war. Russia’s oil revenue, as per the Russian Ministry of Finance, was over 40 percent lower from January – March 2023 than a year ago. Before Moscow launched its special operation in Ukraine, oil revenues made up to 35 percent of the total Russian budget.