The European Union may temporarily freeze the price cap on Russian oil, as the war in the Middle East continues into its fourth month, Bloomberg sources familiar with the situation told Bloomberg.
Last year, the EU introduced a mechanism that automatically resets the price cap every six months to 15% below the average market price of Russian Ural crude. The current price cap is $44.10 a barrel, and its review is scheduled for late summer.
According to the cap, European companies are prohibited from providing services such as insurance and transportation of oil sold at a price above the established cap.
„Oil prices have risen sharply as a result of the war in Iran and the effective closure of the Strait of Hormuz. At the next review of the price ceiling in July, the level is likely to rise to at least $65, exceeding the previous threshold of $60 jointly set by the G-7,” said the sources, who spoke on condition of anonymity to discuss the closed-door talks.
The freeze would thus keep the price ceiling at its current level, limiting the excess profits Russia is reaping from the current high oil prices. Other options under consideration include suspending dynamic and automatic increases until the end of the year, given the exceptional circumstances in the Middle East, or capping any increase at $60, in line with the G-7 level, the sources added.
“The move would be part of the EU’s latest package of sanctions, the 21st since Russia’s full-scale invasion of Ukraine in 2022. The EU intends to finalize and formally propose a package of new measures in early June. Member state ambassadors were briefed on the plans last week, Bloomberg noted.
The sources also said the EU has imposed sanctions on hundreds of ships and plans to target ships that provide services to tankers.
They added that key goals of the new package are to further increase pressure on Russia’s energy revenues and financial sector, as well as to deprive its military industry of essential supplies.
“The support of all member states is needed before sanctions are adopted, and the plans could change before then. Maritime states like Greece often resent changes in price caps, while other capitals are particularly sensitive to what they call their energy and trade interests, the article highlights.
The EU plans to impose trade restrictions on certain critical minerals, metals and ores used in the Russian aerospace sector and for the development of drones used by Russia to bomb Ukrainian cities, as well as technologies such as electronic countermeasures.