In recent months, Australia has moved to implement price caps on Russian crude oil and Russian Petroleum in order to maintain a reliable supply of resources to the global market while simultaneously reducing the revenue Russia earns and the ability of Russia to fund its war against Ukraine.
Import sanctioned goods
On 25 April 2022, Australia designated crude oil and petroleum products as "import sanctioned goods" for Russia, being:
- Crude oil is defined as "petroleum oils and oils obtained from bituminous minerals, crude" (or as described in Tariff Code 2709).
- Petroleum products are defined as "Petroleum oils and oils obtained from bituminous minerals, other than crude; preparations not elsewhere specified or included, containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations; waste oils" (or as described in Tariff Code 2710).
The effect of this designation was that no Australian citizen, entity or entity owned or controlled by an Australian citizen or entity could import, purchase or transport these products.
To complement the restrictions on the import of these goods, financial services in relation to the import, purchase or transportation of the import sanctioned goods was also prohibited.
Price cap on Russian crude oil
On 2 December 2022, the G7 and Australia announced a 60 USD per barrel price cap on seaborne Russian-origin crude oil in line with the unanimous decision by Member States of the European Union to endorse a price cap for seaborne Russian-origin crude oil.1 The price cap on Russian-origin crude oil entered into force in each jurisdiction on 5 December 2022 (or soon thereafter).
G7 and Australia made the following statement regarding the introduction of the price cap:
"We reaffirm our intention to phase out Russian-origin crude oil and petroleum products from our domestic markets. This commitment remains unchanged by the implementation of the price cap. Instead, the price cap is designed to allow our service providers to support shipments of Russian-origin crude oil and petroleum products to other countries - enabling stable energy supplies while restricting Russia's revenue. ... [I]mports under the price cap will help curtail energy prices and restrict Russia's ability to further profit off the wartime premium it has been earning."2
The Minister for Foreign Affairs has issued two general permits in relation to the price cap on oil (as described in Tariff code 2709) including:
- On 5 December 2022, for the provision of financial services in relation to the import of Russian-origin crude oil purchased at or below the 60 USD price cap. Importantly, this permit only authorises the provision of financial services in relation to Russian crude oil, rather than the actual import, purchase or transport of Russian crude oil.
- On 15 February 2023, for the shipping of Russian-origin crude oil purchased at or below the USD60 price cap to countries other than Australia.
Price Cap on Russian Petroleum Products
On 4 February 2023, the G7 and Australia announced another two price caps on Russian petroleum products which entered into force on 5 February 2023 (or soon thereafter). For Russian petroleum products, there are two price caps:
- Discount to Crude petroleum products of Russian origin will be capped at USD45 per barrel (Low Value Price Cap); and
- Premium to Crude petroleum products of Russian origin shall be USD100 per barrel (High Value Price Cap).
On 15 February 2023, the Minister for Foreign Affairs and Trade issued two general permits in relation to the price cap on Russian petroleum products, authorising:
- the provision of financial services in relation to the import of Russian-origin petroleum products purchased at or below the High or Low Value Price Caps. Importantly, this permit only authorises the provision of financial services, rather than the actual import, purchase or transport of Russian petroleum products; and
- the shipping of Russian petroleum products of a High or Low value Russian Petroleum Product to countries other than Australia provided the price of the product is or was at or below the High or Low Value Price Cap.
Each permit has certain notification requirements as a condition of reliance upon these permits.
More details on the Russian oil price cap and the general permits, and the Russian petroleum products price caps and general permits, can be found on the website of the Department of Foreign Affairs and Trade here and here.
Footnotes
1 Press Release - Statement of the G7 and Australia on a price cap for seaborne Russian-origin crude oil
2 Press Release - Statement of the G7 and Australia on a price cap for seaborne Russian-origin crude oil
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