Russian oil price cap set to be slashed as EU pitches latest sanctions package

THE European Commission has formally proposed lowering the Russian oil price cap from $60 to $45 per barrel as it unveiled its latest package of sanctions against Moscow.

The sanctions will ban the use of Russian energy infrastructure, including the two Nord Stream pipelines to Germany, as well as adding a further 77 ships to its existing list of 342 sanctioned vessels. There will also be further measured targeting of Russia’s banking sector.

Announcing the 18th package of measures on Tuesday, commission president Ursula von der Leyen confirmed that the oil price cap, which has remained unchanged at $60 a barrel since its inception in 2023 despite fluctuations in Russia’s trade and evidence of circumvention, would finally be lowered.

“By lowering the cap, we adapt it to changed market conditions and restore its effectiveness,” she said.

Oil exports still represent one third of Russia’s government revenues and the topic of how to better enforce the price cap and lower Russia’s oil revenue is now a key agenda item at the G7 summit in Alberta, Canada that begins this weekend.

Brussels has been seeking US support to add pressure on Moscow and the G7 meeting will be a key test for Washington’s appetite to continue supporting a joint approach.

While the EU could theoretically pass new legislation to reduce the oil price cap to $45 independently, any divergence from the US would likely weaken the initiative rather than strengthen it.

“The oil price cap is a G7 coalition measure,” noted Von der Leyen in a speech on Tuesday, adding that “we will discuss how to act together at the G7 Summit”.

After meeting with US Republican senator Lindsey Graham on Monday, von der Leyen said she was pleased about his plans to pile pressure on Russia. A bipartisan bill he is sponsoring would impose tariffs of 500% on goods imported from countries that still buy Russian fossil fuels and other products.

Referring to the extending list of sanctioned vessels which now totals 419 individual ships, she said that the additions would enhance the EU’s ability to enforce the price cap.

“These vessels are a means to evade sanctions. With our listings, we severely constrain Russia’s options to export its oil through a shadow fleet,” she explained.

The proposed new package will also introduce a ban on the import of refined products based on Russian crude oil. The commission’s proposals are aimed at preventing some of the Russian crude oil reaches the EU market through the back door.