At last, a crackdown. Or is it?

A crackdown on the clear violations of the price cap on Russian oil has been brewing for some time.

The price cap should, in theory, prevent companies from providing services like shipping and insurance to any cargoes priced above the $60 per barrel limit. But with some Russian sales at more than $80 per barrel, even US officials previously adamant the cap was holding have publicly conceded it has a few holes.

In fact, more Russian oil than ever before is being carried on sanctions-busting tankers exploiting regulatory loopholes. The cap’s frustrated enforcers are struggling with a flawed mechanism.

The guidance doesn’t change the US line to shipping companies: If you have the attestations from oil traders and suppliers in Russia to Western shipowners and their marine insurers that serve as ‘proof’ they are complying with sanctions, then you are in the clear.

That most know these attestations are not worth the paper they are written on is apparently neither here nor there. The price cap is designed to keep oil flowing — governments that move too hard or fast risk shooting themselves in the foot. Ignore circumvention completely and the whole system becomes irrelevant.

Yesterday’s announcement is a warning shot, but its authors are firing blanks.

For those companies doing their due diligence, the G7 states want you to continue. For those blatantly breaching the price cap and sailing to countries that don’t recognise it, this latest action doesn’t change a thing.

It could raise the stakes for companies whose due diligence is lax enough to have missed the multiple ship-to-ship transfers leading to them taking on a cargo in breach of the price cap. But how many of those the regulators will be willing and able to catch them is an open question.

The line until now has been that the price cap is a success. Russian oil is trading at a discount to Brent, and the measures have damaged the Russian economy. The price cap breaches undermine that narrative.

If the action against two vessels starts a wider trend of enforcement and emboldens the EU and UK to follow the US lead, then perhaps things could start to change. But US government and insurance insiders say the attitude of not looking too carefully at the gap between oil price and apparently valid attestation has not moved and is unlikely to change any time soon.

Richard MeadeLloyd’s List editor-in-chief has a significant cargo and freight liability account

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