European Union diplomats failed on Friday to agree on the final details of a policy to limit Russia’s oil revenues, according to senior EU diplomats, the latest setback for efforts by the United States and Ukraine’s allies to stem the flow of cash financing Russia’s war in Ukraine.
For most of last week, ambassadors from the 27 EU members meeting in Brussels failed to agree on a maximum price that traders, shippers and other companies in the supply chain could pay for Russian oil sold outside the bloc becomes. The policy must be in place before an EU embargo on Russian oil imports comes into effect on December 5. Talks are expected to resume next week. The embargo only applies to the block of 27 nations. To further limit Russia’s financial gains, the group wants to cap the amount that buyers outside the region pay for Russian oil. This crude could only be sold outside of Europe and would have to be below the agreed price. Russia has repeatedly said it will ignore the policy, and analysts have said it would be difficult to enforce.
The United States and Europe have imposed sanctions on Russia since its all-out invasion of Ukraine, cutting the country off financial markets and making oil, its biggest export, essential to fund the war. At stake is a complex and difficult effort by Ukraine’s allies to limit the Kremlin’s oil export revenues while averting fuel shortages that would push up prices and worsen a global cost of living crisis.
The EU ambassadors were asked to set a price of US$65 to US$70 per barrel and to be flexible in enforcing the limit.
The benchmark price of Russian oil, known as the Ural compound, has traded from $60 to $100 a barrel over the past three years. For the past three months, the price has traded between $65 and $75 per barrel.
The burden of enforcing and monitoring the price cap policy will fall on the companies that help sell the oil. These global shipping and insurance companies are mostly based in Europe. Most of the tankers transporting Russian oil are Greek-owned, according to maritime data. And London is home to the world’s largest shipping insurance companies.
Some EU ambassadors, notably from Poland and other staunch Ukraine allies, said the price range proposed by the G7 is too high and that the cap should be set much lower to hurt Russian revenues, according to several EU officials directly involved. diplomats or informed about the talks. They asked not to be named as they were not authorized to speak publicly.
The ambassadors of these holdout countries also want the oil price cap to be accompanied by clear and immediate plans for further sanctions against Russia – and refuse to sign off on the cap without reassuring that more sanctions are on the way.
Greece, Cyprus and Malta – which are seriously involved in the policy due to their large maritime industries – had called for a higher cap, but agreed on a cap of around $65 a barrel by Friday, diplomats said.
France, Germany and Italy — the three EU nations that are members of the Group of 7 developed countries pushing Russia’s oil price cap — along with a number of other EU members, have sided with the US position on a higher price cap and a soft price pronounced -touch enforcement, diplomats said.
The European Union embargo on Russian oil, which takes effect on December 5, also includes a ban on European services shipping, financing or insuring Russian oil shipments to destinations outside the bloc, a measure that would cripple infrastructure, which transports Russia’s oil to buyers the world.
However, the price cap would allow these European shipping providers to ignore the embargo as long as they ship Russian crude out of the bloc at a price below the cap. Enforcement would be left to companies. Otherwise, they would be held legally liable for violating sanctions.
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