An oil price cap would ban companies from transporting or insuring Russian oil sold above the set price. After long negotiations, the EU states can agree on a corresponding upper limit. Kremlin chief Putin is already warning of serious consequences.
The EU, together with international partners, wants to force Russia to sell oil below the market price to buyers in other countries. An agreement reached by government officials on Friday provides for an initial price cap of US$60 per barrel, as confirmed by several diplomats. The price of around EUR 57 per 159 liters would then be up to EUR 9 below the most recent market price for Russian Urals crude oil. According to the plans, it will apply from Monday.
In order to enforce the price cap, it should be regulated that in future important services for Russian oil exports may only be provided with impunity if the price of the exported oil does not exceed the price cap. Western shipping companies could use their ships to continue transporting Russian oil to third countries such as India.
The regulation should also apply to other important services such as insurance, technical assistance and financing and brokerage services. The hope is that the price ceiling will ease the tension on the energy markets and relieve third countries. In addition, it should also ensure that Russia no longer benefits from rising oil prices and can thus fill its war chest.
In order to be able to react to market developments, the plans envisage reviewing the price cap every two months. It should always be at least five percent below an average price determined by the International Energy Agency (IEA).
The price cap is intended to complement the oil embargo against Russia that the EU decided in June. Among other things, this provides for a ban on the purchase, import or forwarding of crude oil and certain petroleum products from Russia to the EU. The restrictions apply from December 5 for crude oil and from February 5, 2023 for other petroleum products. However, there are some exceptions, for example for Hungary.
Russian President Vladimir Putin had warned of “serious consequences” for the energy market if the West tried to impose a price cap. Such a measure violates “the principles of trade relations” and will most likely have serious consequences for the global energy market.