EU price ceiling for Russian oil comes into force
The sixth package of sanctions, which includes a ban on importing seaborne oil from Russia, adopted by the European Union (EU) countries in June, came into force today with the end of the transition period.
The EU Commission had prepared the sixth package of sanctions in early May. The package included phasing out supplies of crude oil and refined products from Russia. EU member states conducted intensive negotiations on the oil ban.
DRUZBA OIL PIPELINE EXCLUDED FROM SANCTIONS
EU countries were able to reach a consensus, and the latest package was revised to include oil purchases from Russia by tankers and to exclude pipelines from sanctions. EU countries exempted the Druzhba pipeline, which transports oil from Russia to Europe, from sanctions to reach a deal.
Two thirds of the EU’s oil imports from Russia were by sea and one third by pipeline. Before the war, the EU imported about 25 percent of the oil it consumed from Russia. With the sanction, 90 percent of EU oil imports from Russia were halted.
The decision of the EU countries to impose a maximum price of 60 dollars per barrel on oil transported from Russia by sea came into force today. Therefore, if Russian oil is sold to third countries at a price higher than the established price, companies from the G7 countries and the EU will not be able to provide various services, such as transportation, insurance and brokerage of this oil.
To provide these services, Russian oil will have to trade below the ceiling price.
THE MAXIMUM PRICE WILL BE RESET EVERY 2 MONTHS
In addition to the $60 price ceiling for Russian oil, a new price cap mechanism is also in question. This mechanism will ensure that the maximum price of Russian oil remains 5 percent below world market prices.
The maximum price applied to Russian oil will be reassessed every 2 months.
Russia produces about 10 percent of the world’s oil production. On the other hand, Russian officials announced that they would not sell oil to countries participating in the application of the maximum price. EU countries also banned coal imports from Russia on August 10. (AA)