The European Commission has proposed a major overhaul to its Russian oil price cap regime, introducing a floating benchmark tied to global crude prices in an effort to regain control over a sanctions tool that has lost impact as oil markets decline, Reuters reported on Thursday.
Under the new draft plan, disclosed Thursday, the existing $60-per-barrel cap on Russian seaborne crude would be replaced by a flexible mechanism that tracks international prices, likely pegged to Brent, while staying below market rates to maintain pressure on Kremlin revenues. The move marks a sharp departure from the static ceiling implemented by the EU and G7 in December 2022.
The proposal comes amid growing frustration in Brussels over the cap’s fading relevance. With Urals crude currently trading near or below $60, Russia has continued to ship volumes largely unaffected, bypassing enforcement through opaque shipping networks and non-aligned buyers in Asia. A floating cap could reintroduce sanctions pressure if properly enforced through EU-controlled shipping insurance and vessel tracking.
“The fixed cap has been overtaken by market conditions,” one EU diplomat told Reuters exclusively. “We need a tool that adapts to price shifts and keeps revenues constrained.”
The proposed floating system would adjust regularly based on market benchmarks, similar in principle to dynamic tariffs. Final parameters, including discount width and reset frequency, are still under negotiation.
The plan forms part of the EU’s 18th sanctions package, expected to be debated later this month. It would require unanimous approval from all 27 member states.
Energy analysts say the move could complicate Russian export planning and insurance access, though many of the country’s crude flows already circumvent G7-aligned enforcement. Moscow has not formally responded but previously dismissed the price cap mechanism as ineffective.
The change underscores a growing divergence within the G7. While the U.S. and Japan have resisted lowering the cap, the EU is now acting unilaterally to restore sanctions leverage as global oil prices slide and fiscal discipline in Moscow comes under strain. However, the proposal faces familiar headwinds. Several EU member states, including Slovakia and Hungary, have previously resisted tightening sanctions on Russian energy. The price cap overhaul will require unanimous approval to enter into force, and early diplomatic signals suggest consensus may again be difficult to reach.
By Charles Kennedy for Oilprice.com
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