EU's Kallas pushes for lower oil price cap to further strain Russia's economy

European Union foreign policy chief Kaja Kallas has called for a reduction in the price cap on Russian oil, arguing that such a move would further deprive the Kremlin of critical revenue.

Kallas emphasized that tightening the cap would have a significant financial impact on Russia, which is already grappling with diminished oil and gas revenues, Caliber.Az reports via foreign media.

“I’m really pushing for this to be lowered because it has a clear effect,” Kallas stated.

“Russia is struggling because their national fund is depleted, and they don’t get the same revenues that they did from oil and gas. But there is still room that we can use. Definitely, countries need to discuss that.”

Kallas' remarks come as Group of Seven (G7) nations are considering tougher measures to curb Moscow's ability to finance its war in Ukraine.

Discussions have focused on the possibility of reducing the price cap from its current level of $60 per barrel to as low as $40, or even replacing the price cap with a full ban on handling Russian crude.

Note that, oil prices eased on January 14 but remained close to four-month highs, with the market focused on the impact of fresh US sanctions on Russian oil and the upcoming US inflation data.

Brent futures fell 0.7% to $80.48 a barrel, while US West Texas Intermediate (WTI) crude dropped 0.6% to $78.38 a barrel. The sanctions, imposed by the US Treasury Department on January 10, target Gazprom Neft, Surgutneftegas, and 183 vessels in Russia's "shadow fleet" that trade oil.

Although the sanctions could potentially remove 700,000 barrels per day of supply, analysts expect the actual impact to be less as Russia and buyers seek workarounds. The focus now shifts to US inflation data, with any surprise in core inflation potentially impacting Federal Reserve rate decisions, which could influence oil demand.

Analysts suggest that while the market sentiment has improved, stronger catalysts are needed to maintain the upward price trend.

By Aghakazim Guliyev