The UK has issued guidance on restrictions on the provision of letters of credit (L/Cs) once the near Europe-wide ban on Russian oil imports begins next week. The British and Swiss governments have aligned their approaches with the EU and other partners such as the G7 to maximise the impact of these measures on Russia.

Substantial bans, including the UK's, Switzerland's and the EU's, will come into force for Russian crude oil on 5 December 2022 and for Russian petroleum products on 5 February 2023. The US banned all Russian oil and gas imports in March 2022.

European coordination

The European Commission has already issued a notice specifically advising financial institutions issuing L/Cs or opening credit lines to exercise due diligence so that they do not engage in transactions involving Russian crude oil imported into the EU (DC World News, 15 August 2022).

The UK's Russia regulations prohibit UK companies from providing, directly or indirectly: technical assistance; financial services, and funds and brokering services relating to the import, acquisition, and supply and delivery of Russian-origin oil and oil products into the UK.

Funds means financial assets and benefits of every kind, including L/Cs, guarantees, bills of lading, bills of sale and any other instrument of export financing.

Price cap uncertainty

The G7 - Canada, France, Germany, Italy, Japan, the UK and the US - along with Australia, have reportedly agreed to set a fixed price cap on Russian oil from 5 December 2022, but after much discussion the level has not been announced.

The cap is expected to be between US$65-70 a barrel of oil and is intended to hamper Moscow's ability to fund the war in Ukraine while protecting consumers and households from sky-high energy prices.

Full details and guidance on the UK ban on Russian oil and oil products can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.