EU introduces price cap on Russian oil

The EU has published a decision to introduce a price cap on Russia’s oil at 60 US dollars, valid starting from 5 December, says an official website of the European Union.

It is noted that the decision was introduced “in view of Russia’s actions destabilising the situation in Ukraine”. A 45-days transition period is being introduced for vessels transporting crude oil from Russia purchased and loaded to a vessel prior to 5 December 2022 and unloaded at a destination port until 19 January 2023.

“The objectives of the price cap [include] its ability to reduce Russia’s oil revenues. The principle [is] that the price cap should be at least 5% below the average market price for Russian oil and petroleum products. The average market price should be calculated in cooperation with the International Energy Agency,” reads the decision.

G7 (Germany, Italy, France, the UK, Canada, Japan, and the US) and Australia agreed to introduce a price cap on Russian seaborne crude oil at $60 per barrel yesterday.

“Next week, the Price Cap Coalition will ban a broad range of services, including maritime insurance and trade finance, related to the maritime transport of crude oil of Russian Federation origin (“Russian oil”) unless purchasers buy the oil at or below $60/barrel,” their statement reads.

Ukraine’s President Zelensky called the price cap “a weak position” and not “serious” enough to damage the Russian economy. “Russia has already caused huge losses to all countries of the world by deliberately destabilising the energy market,” he said in his address.

It is “only a matter of time when stronger tools will have to be used”, he added.

The Kremlin said earlier that Russia would not trade oil with the countries that impose a price cap. “Russia will not act against common sense and pay for others’ prosperity. We will not supply energy resources to a country that will cap prices for them,” Vladimir Putin said.

At the same time, there is evidence that Russia directly and indirectly purchased more than 100 tankers in the last year, the Financial Times reported, noting that the country is seeking to establish a “shadow fleet” out of these tankers to bypass the ban on seaborne deliveries of oil which will enter into force on 5 December as well as the oil price cap.