Restrictions on Russian Oil Maritime Services

Summary#

The final rule Regulations Amending the Special Economic Measures (Russia) Regulations (SOR/2022-261) adds new limits on services tied to the sea transport of Russian crude oil and petroleum products. The regulations were registered on December 7, 2022 and published on December 21, 2022; most of the changes came into force on registration, while one key change takes effect on February 5, 2023.

What it does#

• Prohibits people in Canada and Canadians abroad from providing certain services to Russia, or to people in Russia, that enable the marine transport (including ship-to-ship transfers) of Russian crude oil and petroleum products if the goods are sold above the coalition price cap.
• The price cap is set by the international Coalition (G7 members plus Australia) and referenced in the rules.
• Lists the banned services in a new Schedule 10. They include:
  • Trading and commodities brokering
  • Financing and financial assistance
  • Shipping
  • Insurance and reinsurance
  • Protection and indemnity (liability cover)
  • Flagging (vessel registration)
  • Customs brokering
• Adds a broad prohibition on knowingly doing anything that helps or facilitates any of the banned activities.
• Includes exceptions:
  • Transactions for goods already loaded on a ship before the rule came into force and unloaded within 45 days after coming into force.
  • Services needed in an emergency to protect navigation, human life, or the environment.
  • Imports into the Republic of Bulgaria, the Republic of Croatia or landlocked EU member states, where EU rules allow them.

Who's affected#

• Service providers who deal with sea transport of crude oil and petroleum products. That includes banks, insurers, brokers, shipping companies, vessel registries, and customs brokers.
• Any person in Canada and Canadians working abroad who provide those services to Russia or to persons in Russia.
• The measures were designed with international partners (the G7 and the international Coalition), so their biggest effects attach to firms that already serve the Russian seaborne oil market.
• According to the government’s impact statement, the Canadian footprint in these services is thought to be small. It is unclear in the regulations how many Canadian businesses will actually be blocked; the source says the domestic impact is expected to be limited.

Why it matters#

• These rules are part of the international effort to lower revenues flowing to Russia from oil sales while avoiding big shocks to global energy markets. They allow Coalition service providers to support Russian oil sales only when the oil is bought at or below the agreed price cap.
• For people and businesses, this means Canadian banks, insurers, ship operators and brokers must check whether a shipment is covered by the price cap before providing services related to Russian oil. Non-compliance can lead to enforcement action.
• Enforcement is carried out by the Royal Canadian Mounted Police and the Canada Border Services Agency. Penalties include fines up to $25,000 and/or imprisonment up to 1 year on summary conviction, or imprisonment up to 5 years on indictment.