Media: Brussels freezes plan to slash Russian oil cap as global prices fluctuate

The European Union has decided not to move forward with a proposed tightening of the price cap on Russian oil exports, citing rising geopolitical tensions and oil market volatility driven by the conflict between Israel and Iran.

The plan, which would have reduced the price cap on Russian oil from $60 per barrel to $45, was scheduled for discussion by EU foreign ministers in Brussels on June 23, Caliber.Az reports, citing foreign media.

However, two diplomats confirmed that the rapidly escalating situation in the Middle East has rendered the proposal unworkable.

"The idea of lowering the price cap is probably not going to fly because of the international situation in the Middle East and the volatility," said one diplomat, speaking anonymously due to the sensitivity of the matter. "At the G7 meeting this week, it was agreed by all the countries they would prefer not to take the decision right now."

The diplomat noted that while oil prices had previously hovered near the existing cap, the current unpredictability of global energy markets made any change too risky: "The prices were quite close to the cap; but now the prices are going up and down, the situation is too volatile for the moment."

During the G7 summit in Canada, European Commission President Ursula von der Leyen acknowledged the limited effectiveness of the current cap but defended its continued relevance. “In the last days, we have seen that the oil price has risen [and] the cap in place does serve its function ... So for the moment, there's little pressure on lowering the oil price cap.”

The $45-per-barrel proposal, originally pushed by Ukraine, had been incorporated into the EU’s 18th sanctions package. The measure aimed to significantly reduce Russia’s oil revenue, a key funding source for its war in Ukraine. But without American backing, enforcement is deemed unrealistic.

“Lowering the cap without a buy-in from the US wouldn't be effective,” said Maria Shagina of the International Institute for Strategic Studies. “Designed as a buyer's cartel, the cap needs the US to be part of it.”

Shagina also stressed the importance of enforcement, noting that “currently around 90 per cent of Russian crude is shipped over the price cap.”

By Vafa Guliyeva