European Union officials are discussing a complex effort for Ukraine’s partners to cut off Russia’s oil export revenues. The G-7 nations are about to release a new plan to cap the price of Russian oil exports, as part of sanctions intended to punish Moscow for its February invasion of Ukraine. The EU already adopted a ban on seaborn oil imports from Russia in June, but it was conditional on the G-7 placing a complementary restriction on Russia’s ability to ship its oil exports to other major destinations outside the European single market.
The G-7 price cap would allow companies in the grouping’s member states to provide services—including shipping, insurance and financing—on Russian oil exports outside Europe but only if they are under a yet-to-be-determined price. An EU diplomat said today that the price is likely to be between $65 and $70 per barrel, but some EU members are pushing for the cap to be higher. Determining the cap is a delicate balance for the EU to maintain, because it needs to be low enough to prevent the proceeds from Russia’s oil sales from funding Moscow’s war effort, but high enough—and more than the $20 per barrel in Russian production costs—to ensure that Russia doesn’t remove its oil from global markets and trigger a supply shortage.
EU leaders approved a complete ban on Russian oil imports into the union by sea earlier this year, but only after carving out exemptions for pipeline-delivered imports of Russian oil to Hungary, the Czech Republic and Slovakia. The EU also overcame objections from Greece, Cyprus and Malta—the three members whose tankers transport the majority of the bloc’s Russian oil imports—to an accompanying price cap on Russian oil delivered by EU-registered ships by making a number of concessions. These included weakening sanctions on other Russian goods like fertilizers and cement, and setting up a monitoring system to deter the reflagging of ships in order to avoid the EU’s cap.