The European Union has put forth a proposal to ban imports of refined oil products derived from Russian crude oil and to lower the G7’s price cap to $45 per barrel. This significant shift in sanctions policy marks the first major change since 2022.
European Commission President Ursula von der Leyen, during a live announcement, explained that the intent is to tighten controls and prevent Russian crude from entering the EU market through indirect channels. The proposed ban specifically targets refined products processed overseas from Russian crude.
Von der Leyen emphasized the importance of this measure in preventing the circumvention of existing sanctions. Additionally, the EU plans to advocate for the reduction of the G7 price cap from $60 to $45 per barrel during an upcoming summit in Canada, citing changes in market conditions as the basis for this adjustment.
However, any change to the G7 price cap will require consensus from other member nations, including the UK, Japan, and the US. Although US President Donald Trump has previously opposed a proposed $50 price cap, the ongoing geopolitical tensions regarding Russia’s actions in Ukraine could influence future agreements.
The EU’s previous sanctions have primarily aimed to restrict Russian oil revenues while trying to minimize the impact on global oil supply. Following the bans on Russian crude in 2022 and 2023, countries like India, China, and Turkey capitalized on the situation, significantly increasing their imports of Russian-grade oil and refined products.
The existing price cap has allowed these nations to continue benefitting from cheaper Russian oil, thereby undermining the effectiveness of the sanctions. In response to the proposal, financial analysts express skepticism about enforcement capabilities, particularly regarding the shadow fleet of tankers operating outside of the sanctions framework.
Furthermore, the number of tankers transporting sanctioned oil continues to grow, complicating the EU’s efforts to regulate this market effectively.