Jul 14, 2025
EU diplomats are close to reaching an agreement on a lower price cap for Russian oil.
European Union envoys are close to finalizing an 18th sanctions package against Russia due to its invasion of Ukraine, which includes a lower price cap on Russian oil, according to four EU sources after a meeting on Sunday. While all elements of the package have been agreed upon, one member state has a technical concern regarding the new cap. The sources, who requested anonymity to discuss private negotiations, expect a complete agreement on Monday, ahead of a foreign ministers' meeting in Brussels the next day that may formally endorse the package.
A dynamic pricing mechanism for the cap has also been agreed upon. The European Commission proposed a floating price cap set at 15% below the average market price of crude for the previous three months. One source indicated that the initial price would be approximately $47 per barrel, based on the average price of Russian crude over the last 22 weeks minus 15%. Additionally, the price would be adjusted based on average oil prices every six months instead of the previously suggested three months.
Slovakia, which has delayed the proposed package, is still seeking assurances from the European Commission regarding concerns about phasing out Russian gas supplies, but has consented to the new measures. Sanctions require unanimous approval from all EU member states for adoption.
The G7 price cap, intended to limit Russia’s funding for its war in Ukraine, was initially established in December 2022. The EU and Britain have been urging the G7 to reduce the cap over the past two months, following a decrease in oil futures that rendered the existing $60 per barrel cap largely ineffective. The cap forbids trade in Russian crude transported by tankers if the price exceeds $60 per barrel, and prevents shipping, insurance, and re-insurance companies from handling Russian crude unless sold under the price cap.
The Commission proposed this package in early June to further diminish Moscow's energy revenues, which includes a ban on transactions involving Russia's Nord Stream gas pipelines and financial networks that help circumvent sanctions. Furthermore, one source mentioned that the new package will identify a Russian-owned refinery in India, two Chinese banks, and a flag registry, as Russia has utilized flags of convenience for its fleet of ships and oil tankers.
A dynamic pricing mechanism for the cap has also been agreed upon. The European Commission proposed a floating price cap set at 15% below the average market price of crude for the previous three months. One source indicated that the initial price would be approximately $47 per barrel, based on the average price of Russian crude over the last 22 weeks minus 15%. Additionally, the price would be adjusted based on average oil prices every six months instead of the previously suggested three months.
Slovakia, which has delayed the proposed package, is still seeking assurances from the European Commission regarding concerns about phasing out Russian gas supplies, but has consented to the new measures. Sanctions require unanimous approval from all EU member states for adoption.
The G7 price cap, intended to limit Russia’s funding for its war in Ukraine, was initially established in December 2022. The EU and Britain have been urging the G7 to reduce the cap over the past two months, following a decrease in oil futures that rendered the existing $60 per barrel cap largely ineffective. The cap forbids trade in Russian crude transported by tankers if the price exceeds $60 per barrel, and prevents shipping, insurance, and re-insurance companies from handling Russian crude unless sold under the price cap.
The Commission proposed this package in early June to further diminish Moscow's energy revenues, which includes a ban on transactions involving Russia's Nord Stream gas pipelines and financial networks that help circumvent sanctions. Furthermore, one source mentioned that the new package will identify a Russian-owned refinery in India, two Chinese banks, and a flag registry, as Russia has utilized flags of convenience for its fleet of ships and oil tankers.