P&I Clubs have issued a Circular offering industry guidance regarding the recently introduced legislation related to the price cap of Russian oil.
Introduced by the so-called “Price Cap Coalition”, which includes the EU, G7 and Australia and becomes effective from 5th December 2022, the legislation aims to reduce Russia’s earnings from its oil exports, while maintaining the supply of Russian oil to global markets.
As it is mentioned in the circular issued recently, under the Price Cap Scheme, International Group of Protection and Indemnity Clubs will now be able to provide P&I cover for Russian crude oil shipments to countries which are not part of the Price Cap Coalition provided that the price of the Russian crude oil cargo from the time it is loaded until it has cleared customs at the port of destination is at or below $60 per barrel.
A separate price cap will be introduced on 5 February 2023 for Russian petroleum products.
Ships with Russian crude oil on board as of December 5, 2022 may continue to lawfully perform the voyage even if the cargo has been sold at a price above the Price Cap, if the voyage will be completed and the cargo off loaded by 19 January 2023.
Clubs, shipowners and charterers will now be required to check the price of Russian oil cargoes on board ships they own, charter or insure. These checks will take the form of contractual attestations, provided by their contractual counter parties, stating that for the relevant period the price will not exceed the Price Cap.
Shipowners or Charterers, that intend to transport Russian crude oil cargoes after 5 December, will now need to provide its P&I Club with an attestation, that it will not for the duration of the period of insurance carry Russian oil cargoes, which have been sold at a price that for the period it is on board the vessel has exceeded the Price Cap.
Additionally, Shipowners and Charterers currently engaged in trades, involving the carriage of Russian crude oil that commenced prior to 5 December 2022, but which will be completed by 19 January 2023 will need to complete a separate attestation.
As it is furthermore mentioned in the circular, club cover for the carriage of Russian crude oil loaded after 5 December 2022, and petroleum products loaded after 5 February 2023 is dependent on members complying in full with the requirements of the price cap schemes, including the provision of appropriate attestations. Clubs will be required to withdraw cover, where there are reasonable grounds to suspect, that the cargo being carried has been purchased at a price greater than the price cap.
Source: London P&I Club Circular