Reuters: EU poised to slash Russian oil cap in new sanctions package

European Union envoys are poised to agree on the bloc’s 18th package of sanctions against Russia, targeting the Kremlin’s wartime revenues with a revised oil price cap and new measures aimed at curbing sanctions circumvention, four EU diplomatic sources said following a meeting on July 13.

According to the sources, all elements of the sanctions package have been agreed, although one member state—identified as Slovakia—still maintains a technical reservation related to the updated oil price mechanism. Full approval is expected by July 14, ahead of a scheduled meeting of EU foreign ministers in Brussels on July 15, where the measures could be formally endorsed, Caliber.Az reports via Reuters.

The centrepiece of the new package is a dynamic pricing mechanism that lowers the cap on Russian oil exports. As proposed by the European Commission, the cap would be set at 15% below the average market price of crude oil over the past three months. However, diplomats said a compromise had been reached to revise the cap every six months instead of three, with an initial price around $47 per barrel—based on data from the last 22 weeks.

The adjustment aims to make the price cap, first introduced in December 2022 in coordination with the G7 and the UK, more effective. The existing $60-per-barrel threshold has become largely symbolic, given the drop in global oil prices in recent months.

The sanctions package also includes new listings and restrictions. One diplomat revealed that a Russian-owned refinery in India, two Chinese banks, and a flag registry used for Russia’s so-called "shadow fleet" of tankers would be added to the blacklist. The move targets efforts by Moscow to circumvent existing sanctions by rerouting trade and using flags of convenience for maritime transport.

In addition to the oil measures, the 18th sanctions package contains provisions to tighten restrictions on Russia’s energy infrastructure, including a ban on transactions involving the Nord Stream gas pipelines. It also targets financial networks aiding Russia’s evasion of existing restrictions.

Slovakia, which had delayed the agreement, is reportedly satisfied with assurances from the European Commission on its concerns regarding the gradual phase-out of Russian gas supplies.

The unanimity requirement among the EU’s 27 member states means even technical reservations can hold up sanctions. However, the mood following the latest round of talks indicates a consensus is within reach.

The EU and UK have pushed for months to revise the oil price cap as part of a broader strategy to deplete the Kremlin’s war chest without causing a global supply shock. Under the mechanism, Western shipping, insurance, and reinsurance firms are barred from handling Russian crude sold above the capped price.

By Vugar Khalilov