European Union states have approved a fresh sanctions package on Russia over its war against Ukraine including a revised oil price cap, new banking restrictions, and curbs on fuels made from Russian petroleum.
The package, the bloc’s 18th since Moscow’s full scale invasion, will see about 20 more Russian banks cut off the international payments system SWIFT and face a full transaction ban, as well as restrictions imposed on Russian petroleum refined in third countries. A large oil refinery in India, part-owned by Russia’s state-run oil company, Rosneft PJSC, was also blacklisted.
The cap on Russian oil, currently set at $60 per barrel, will be set dynamically at 15 percent below market rates moving forward. The new mechanism will see the threshold start off somewhere between $45-$50 and automatically revised at least twice a year based on market prices, Bloomberg previously reported.
The latest sanctions by the European Union are aimed at further crimping the Kremlin’s energy revenue, the bulk of which comes from oil exports to India and China.
However, the original price cap imposed by the Group of Seven has had a limited impact on Russia’s oil flows, as the nation has built up a huge shadow fleet of tankers to haul its oil without using western services.
The EU has also so far failed to convince the US to offer crucial support to the lower cap. Discussions are ongoing with other G-7 members but the US opposition is making it hard to reach agreement, according to people familiar with the matter. The UK, however, is expected to be on board with the move, the people said.
The EU’s move to restrict fuels such as diesel made from Russian crude could have some market impact, as Europe imports the fuel from India, which in turn buys large amounts of Russian crude. Diesel markets have been showing signs of tightness for several weeks, and prices strengthened in early European trading relative to crude.
The bloc’s envoys backed the sanctions on Friday morning once Slovakia signed off. The package is set to be adopted later Friday at a meeting of EU ministers in Brussels. There can still be 11th-hour tweaks before the measures are formally adopted.
Other measures include sanctions on dozens more vessels in Russia’s shadow fleet of oil tankers, bringing the total above 400, as well as on several entities and traders that work with the covert fleet; the addition of more goods to existing export lists of restricted items used by Moscow’s war machine; and sanctions on several entities, including in China and elsewhere, that are seen to help Russia skirt the bloc’s trade and energy restrictions.
In the gas market, there were also sanctions on the Nord Stream pipelines.
The package had been held up for weeks by Slovakia as it was seeking relief from an EU plan to phase out Russian fossil fuels. Prime Minister Robert Fico announced on Thursday that he was lifting his country’s veto after accepting guarantees provided by the European Commission.
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