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Russian Oil Shipping Rates Jump As The U.S. Sanctions Price Cap Evaders

Shipping rates for transporting Russian crude have surged since last week after the U.S. took a tougher stance on sanctions for vessels carrying Russia’s oil above the G7 price cap, traders have told Reuters.

Last week, the United States took a tougher stance on the Western sanctions against Russia.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed last Thursday sanctions on two entities and identified as blocked property two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap.

The ceiling of $60 per barrel of Russian crude oil set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.

Thursday’s sanction move was the first time the U.S. had imposed sanctions for a breach of the price cap.

“Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” Deputy Secretary of the Treasury Wally Adeyemo said in a statement.

As the sanctions spooked more tanker owners that abandoned the market of shipping Russian crude, the freight rates for transporting Russia’s oil from its Baltic Sea ports to India have surged by 50% in just a few days, the trading sources told Reuters.

“Freight rates rose to some $7.5 million per voyage on Monday from $4.5 million-4.8 million last week,” one source with a trading firm involved in Russian oil sales told Reuters.

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Some shipowners have already exited Russian trades but the U.S. sanctions enforcement prompted more companies to quit the Russian oil sales market, the source added.  

By Charles Kennedy for Oilprice.com

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