EU wants to reduce price cap for Russian oil

The European Union will propose this week to finance ministers from the group of highly industrialized countries (G7) to reduce the current price cap of $60/barrel, which applies to Russian oil delivered by sea, as part of a new package of sanctions against Moscow, European Commissioner for Economy, Valdis Dombrovskis, said yesterday, Reuters reports, according to Agerpres.

Valdis Dombrovskis did not specify to what level the EU would like the price cap to be reduced, but a number of European officials close to the discussions said the EU would propose a cap of $50/barrel.

Asked by reporters whether he would make a proposal to lower the price cap at the G7 finance ministers' meeting in Canada this week, Dombrovskis said: "Yes", adding: "It is something that I have raised from the Commission in the context of the 18th sanctions package. I expect there will be interest from other G7 partners on this issue and some discussions." The G7 is made up of the US, Canada, the UK, France, Germany, Italy and Japan. The G7 finance ministers' meetings are also attended by the European Commission and the president of the Eurogroup. The G7 countries agreed on 5 December 2022 to ban Western companies from providing insurance, financing and brokerage services for ships carrying Russian crude at a price higher than $60/barrel, as part of sanctions imposed on Moscow for its invasion of Ukraine. The measure was intended to reduce Russia's revenues so that Moscow would have less money to finance its war in Ukraine and, at the same time, avoid a dramatic drop in global oil supplies. However, Russia was able to circumvent the G7 price cap thanks to a "shadow" fleet of tankers that do not obtain insurance from Western companies and also because Russian Urals crude traded above the price cap for much of the time. However, in early April, Russian oil prices fell below $60/barrel, as concerns about global economic growth following Trump's tariffs also affected oil prices.