EU Considers Temporary Freeze on Russian Oil Price Cap

The European Union is considering temporarily freezing the price cap on Russian oil as part of its upcoming 21st sanctions package, Bloomberg has reported, citing sources familiar with the discussions. The move is driven by rising energy prices linked to the war in the Middle East and the closure of the Strait of Hormuz.

Under a dynamic mechanism adopted last year, the price ceiling for Russian Urals crude is automatically set at 15% below the average market price every six months. European companies may only insure and transport Russian oil if it is sold below the cap. If the mechanism were applied in July, the limit could rise to around $65 a barrel. The European Commission is therefore considering whether to freeze the cap at its current level or limit any increase to a maximum of $60.

The new package, expected to be unveiled in early June, also targets sanctions evasion more broadly. Measures include action against additional banks, crypto operators and around 20 tankers belonging to Russia's shadow fleet, with restrictions to be gradually extended to vessels carrying liquefied natural gas (LNG).

Brussels is also proposing export controls on roughly two dozen companies from China, India and Turkey that supply Russia with critical components for its arms industry. The discussions also cover protection of Euroclear from Russian retaliation, as the EU plans to keep the Russian central bank's 210 billion euro in frozen assets until war reparations are paid to Ukraine.

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