- Member states struggle to pass the 18th sanctions package.
- Floating price cap might not necessarily pressure Urals.
- Uncertainty over whether the US plans to move in tandem.
EU diplomats are meeting on July 14-15 in their latest attempt to finalize the 18th sanctions package against Russia, with early reports suggesting a floating price cap for Russian oil was under discussion, as well as more sanctioning of ships and companies facilitating the country’s petroleum trades, reports Platts.
Russian oil price cap at 15%
The bloc’s executive, the European Commission, has been proposing various measures in recent weeks to undermine Moscow’s war chest in its fight against Ukraine, but EU member states have yet to agree on how or whether to toughen their trade restrictions against the OPEC+ member.
“It is now for the EU member states in the council to discuss and adopt it,” the EC told Platts in an emailed statement as the two-day Foreign Affairs Council meeting began.
Among the new proposals, Reuters reported that the bloc is on the verge of approving a Russian oil price cap at 15% below average international prices for the previous three months, but that the threshold would be only updated every six months.
The planned revamp comes as Russia’s flagship crude, Urals, has mostly traded below the existing G7 price cap of $60/b on a free-on-board Primorsk basis in recent months, allowing G7-linked shipping companies — Greek tanker operators in particular — to hike their shipments of Russian oil legally.
In June, more than 39% of Russian seaborne crude exports were loaded by tankers flagged, owned or operated by companies based in the G7, the EU, Australia, Switzerland or Norway, or insured by Western protection and indemnity clubs, S&P Global Commodities at Sea and Maritime Intelligence Risk Suite data showed. The proportion was the highest monthly reading since November 2023.
Whether the EU’s new proposal could achieve its intended goal of squeezing Russia’s oil revenue could depend on technical details, such as how Brussels defines international oil prices. Platts, part of S&P Global Commodity Insights, assessed the discount of Urals to Date Brent at $12.60/b in the three months to July 11, or nearly 19% in percentage terms — actually deeper than the proposed level of 15%.
Struggle to form consensus
In its earlier proposals last month, the EC was advocating a transaction ban for the Nord Stream and Nord Stream 2 gas pipelines, a plan to lower the Russian oil price cap from $60/b to $45/b, and a ban on the import of refined products based on Russian crude.
Slovakia teamed up with Hungary to block their adoption due to energy security concerns, citing a separate EU plan to halt Russian gas imports from 2028. Slovakian Prime Minister Robert Fico has reiterated the landlocked country would continue to veto any new sanctions package unless there are guarantees of future supplies.
“We are requesting that the relevant stakeholders provide the Slovak Republic with the necessary guarantees that after Jan. 1, 2028, Slovakia will have sufficient gas supplies at reasonable prices,” Fico said in an open letter to the Czech Republic — which takes a tougher stance on Russia — posted to X on July 14.
The EC earlier said 77 shadow fleet tankers would be added to the bloc’s sanctions list for transporting Russian oil in circumvention of the price cap, and Reuters reported a Russian-owned refinery in India, two Chinese banks, and a flag registry could also be blacklisted.
Industry participants have suggested that EU sanctions enforcement often fails to pressure Russian oil exports or prices unless it is in coordination with other G7 members. The UK Office of Financial Sanctions Implementation, which often acts in tandem with Brussels and has strong clout over marine insurers, did not immediately respond to an email seeking comments.
Washington has refrained from imposing new sanctions on Russia since Donald Trump returned to the White House in January, but the US president recently signaled he plans to pressure Russia more due to the lack of progress in peace talks.
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Source: Platts
