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The European Union has reached an agreement on a new sanctions package against Russia, which includes a lower price cap for Moscow’s crude oil barrels.
Within a year of Russia’s 2022 invasion of Ukraine, the G7 and EU restricted the price at which non-G7 countries could continue purchasing Moscow’s crude and oil products while using shipping and logistical services from G7 companies.
The measures aimed to limit Russia’s oil revenues — the backbone of its economy and war coffers — while retaining the country’s supplies in the market to avoid a major shortage.
The price cap agreed in December 2022 banned access to G7 transport, insurance and reinsurance services if non-G7 buyers paid more than $60 per barrel for crude. Formerly a staple of European refiners’ intake, Russian crude now primarily heads to buyers in China and India.
Russia’s crude production averaged 9.19 million barrels per day in June, according to the International Energy Agency’s July report. The price cap measures have also shifted the transport of some of Russia’s volumes to a so-called shadow fleet of off-radar tankers and shell companies.
EU policymakers on Friday signaled the Russian oil price threshold would be lowered as part of a newly agreed sanctions package.
“I welcome the agreement on our 18th sanctions package against Russia. We are striking at the heart of Russia’s war machine. Targeting its banking, energy and military-industrial sectors and including a new dynamic oil price cap,” EU Commission President Ursula von der Leyen said on social media.
The EU’s top diplomat Kaja Kallas concurred that a “lower oil price cap” was part of the freshly agreed measures, also noting that the bloc had, for the first time, sanctioned Russian oil producer Rosneft’s largest refinery in India.
Neither official explicitly named the level of the new price cap.
The new price cap on Russian crude will remain flexible in line with market dynamics and will be set at just above 47 dollars per barrel at current market prices, according to four European officials who spoke to CNBC on the condition of anonymity due to the sensitivity of the topic.
CNBC has reached out to Canada, holder of the G7’s yearly rotating presidency in 2025, for comment on whether the group endorses the lowered threshold. CNBC has also contacted Russia’s Ministry of Foreign Affairs and Ministry of Energy for comment.
The price cap amendment is part of a broader European push to further pressure Russia to cease hostilities in Ukraine.
U.S. President Donald Trump initially took a more conciliatory tone toward the Kremlin than his predecessor Joe Biden after taking office in January, but has shown signs of diminishing patience in the face of stalled negotiations to broker a ceasefire.
U.S. Senator Lindsey Graham has recently hinted at the possibility of U.S. measures against countries that buy Russian oil, in an attempt to “give President Trump a congressional sledgehammer — if needed — to end this bloodbath.”
Buyers such as India have previously defended their right to purchase discounted Russian oil, citing the national interest to secure the most affordable energy resources.
Oil markets have been rocked by supply stability concerns in recent months, as escalating tensions between Israel and Tehran raised the specter of flow disruptions in both Iran and the broader oil-rich Middle East.
— CNBC’s Silvia Amaro contributed to this report.
