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Six EU Members Want Lower Price Cap for Russian Oil
Six European Union members have called on the Commission to lower the price cap set on Russian oil prices by the G7 as part of a sanction series aiming to cripple Russia’s economy in response to its 2022 incursion into Ukraine.
“Measures that target revenues from the export of oil are crucial since they reduce Russia’s single most important income source,” Sweden, Denmark, Finland, and the three Baltic states said in a letter, as quoted by Reuters. “We believe now is the time to further increase the impact of our sanctions by lowering the G7 oil price cap,” they added.
The G7 price cap for Russian oil was set at $60 per barrel back in 2023, aiming to reduce Russia’s revenues from exporting its crude while avoiding a market shock that would lead to a price surge. The enforcement of the cap was to be in the hands of insurers and shippers carrying Russian oil. If sellers wanted to use Western insurance and tankers, they had to commit to not asking a higher price for the oil than $60 per barrel.
The result of that was that Russia took to using its own tankers and its own insurers as well as coverage providers from Asia and the Middle East. An oil price shock was indeed avoided, at the cost of Russian oil continuing to flow quite freely, only in a different direction—to the East.
Now, it seems that the Baltics and the Nordics have gotten inspiration from the outgoing Biden administration, which just slapped more sanctions on Russian oil ahead of Trump’s inauguration, and are pressing the European Commission for additional action as well. Russia has repeatedly stated it would not comply with any price caps.
The effect on oil prices from the latest Biden sanctions is already clear: the benchmarks are up and could go higher still as supply tightens globally.
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