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New Russian Oil Price Cap Provisions in Loan Agreements

Simply Speaking
May 31, 2024

What are they and what do they do?

Over the past twelve months, lenders in the maritime transportation industry have increasingly required provisions in loan agreements (the “Russian Oil Provisions”) whereby the borrowers represent they are in compliance with, and covenant to maintain compliance with, specific sanctions relating to trading oil with Russia. In December 2022, in response to Russia’s invasion of Ukraine, a coalition of the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States), the European Union (“EU”), and Australia (the “Price Cap Coalition” or “Coalition”) imposed a price cap on the maritime transport of Russian oil and petroleum products (the “Russian Oil Restrictions”).1 Under the Russian Oil Restrictions, oil servicers in Price Cap Coalition countries are prohibited from providing a broad range of services related to the maritime transport of Russian crude-oil unless that oil is bought and sold at or below the specific price cap set by the Coalition, currently $60 per barrel.2

Borrowers covenant to comply, and assure that charterers and sub-charterers comply, with the Russian Oil Restrictions through specific enumerated actions, including providing: (i) oil price information to lenders or formal attestations where the information is confidential; (ii) evidence of appropriate licensure to purchase or transport Russian oil; (iii) undertakings related to maintaining compliance with future updates to the Russian Oil Restrictions; and (iv) a certain level of due diligence to assure the accuracy of counterparty information provided to the lenders.

Why are they there?

The Russian Oil Restrictions affect operators in the Price Cap Coalition countries who provide certain services in the maritime transport of Russian crude oil and petroleum products, including but not limited to shipping, financing, insuring, flagging, trading/commodities brokering, and customs brokering. These operators are exempt from the Russian Oil Restrictions when the price of Russian oil and other covered products falls at or below the price cap. The applicability of the price cap exemption relies on operators complying with certain recordkeeping requirements, including the attestations now appearing as covenants of the Borrower in new Russian Oil Provisions in loan agreements. Thus, the inclusion of Russian Oil Provisions in loan agreements is an added level of protection for lenders and borrowers alike to ensure compliance with the documentation and due diligence requirements under the Russian Oil Restrictions. The inclusion of the Russian Oil Provisions may also more broadly serve as a public statement regarding the commitment of loan parties to comply with the Russian Oil Restrictions.

What is the impact on borrowers and lenders?

When considering adding this provision to a loan agreement, borrowers and lenders should note that failing to comply with a Russian Oil Provision in a loan agreement may qualify as a covenant breach that triggers an event of default. Accordingly, a situation may arise where circumstances beyond a borrower’s control cause a borrower to fall out of compliance with the Russian Oil Restrictions, triggering an event of default under a loan agreement.

What are the considerations of negotiating this provision?

Because borrowers already covenant in loan agreements to remain in compliance with the laws of applicable jurisdictions, Russian Oil Provisions may be somewhat duplicative of other covenants in the loan agreement. However, the Russian Oil Provisions may expand this undertaking by requiring that borrowers assure that charterers and sub-charterers comply with the Russian Oil Restrictions as well. Further, lenders may require the added confirmation of the borrower’s commitment to complying specifically with the Russian Oil Restrictions as described in the Russian Oil Provisions. Accordingly, while arguably redundant with respect to the borrower, the expanded application to charterers and sub-charterers may cause lenders to require the inclusion of Russian Oil Provisions in loan agreements while the Russian invasion of Ukraine remains ongoing. Finally, because the exact requirements of the Russian Oil Restrictions may change, careful attention should be paid to the drafting language of Russian Oil Provisions by counsels to loan parties.


The attorneys on the Seward & Kissel Maritime Practice Team have extensive experience with a vast array of maritime practices. If there are any questions about Russian Oil Provisions in loan agreements, please contact any attorney on the Seward & Kissel Maritime Practice Team.


1 For more information, please see the February 1, 2024 enforcement update published by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury at the following link:

2 The price cap for other petroleum products varies. OFAC published guidance on February 3, 2023, which was revised on December 3, 2023, regarding the compliance requirements of the Russian Oil Restrictions, found at this link:

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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