Key facts
- EU countries are in urgent negotiations to avoid an automatic revision of the Russian oil price cap.
- The current price cap is $44.10 per barrel and is set to be reviewed on July 15.
- A failure to agree on new sanctions will automatically raise the cap to approximately $58 per barrel.
- The European Commission proposed delaying the review to keep the cap at its current level.
- Several EU member states, including Greece, Malta, and Cyprus, have raised objections to the delay.
- Other contentious issues in the sanctions package include bans on Russian fish, LNG, and entry bans for Russian soldiers.
European Union countries are in a race against time to agree on a new package of sanctions against Russia before a critical July 15 deadline. The primary concern is an automatic revision of the price cap on Russian oil, which could rise significantly if no agreement is reached.
The current price cap is set at $44.10 per barrel. Under the rules, it must be adjusted every six months to remain 15% below the average market price. With Russian oil prices having surged recently, the upcoming review is expected to push the cap up to around $58 per barrel. This increase is viewed by the European Commission as unpalatable, as it could provide much-needed revenue for the Kremlin and potentially destabilize global energy markets.
To avoid this scenario, the European Commission has proposed delaying the price cap review until January. However, this proposal has met with resistance from several member states, notably Malta, Cyprus, and Greece, all of which have significant maritime service sectors. These countries are questioning the postponement, emphasizing the dual objectives of the oil price cap: to reduce Russia's revenues and maintain global energy market stability, especially in light of the current Middle East crisis.
The price cap is part of a broader sanctions package that requires unanimous agreement among all EU member states. Recent meetings of ambassadors have been inconclusive, with further discussions planned. Some diplomats are considering an emergency meeting to finalize the package before the July 15 deadline.
Beyond the oil price cap, other contentious issues are complicating negotiations. Portugal and Germany have expressed concerns about proposed bans on Russian cod and pollack, respectively, due to the potential impact on their domestic industries. Germany has reportedly found a solution, while Portugal continues to seek one. Discussions are also ongoing regarding a ban on selling LNG tankers to Russia and allowing the transit of Russian LNG through EU waters. France and Italy are resisting an ambitious entry ban for Russian soldiers, though a compromise has been reached to narrow it down to short-stay visas and individuals directly involved in the invasion of Ukraine.
The most significant obstacle appears to be Bulgaria's opposition to sanctioning Patriarch Kirill, head of the Russian Orthodox Church, and billionaire oligarch Vagit Alekperov. Bulgaria cites religious reasons for opposing sanctions on Kirill and a substantial compensation claim filed by Lukoil against the Bulgarian state as reasons for opposing sanctions on Alekperov. Despite these objections, diplomats anticipate that these two individuals may eventually be removed from the draft list to achieve unanimity. If the entire package cannot be agreed upon, there is an option to split it, prioritizing the urgent measure of the oil price cap.