A price cap on Russian oil at $60 (£49) per barrel, enforced by the Group of Seven (G7) industrialized economies (USA, Canada, Great Britain, France, Germany, Italy, Japan), as well as the EU, and Australia, came into effect on 5 December, 2022.

As part of the sanctions imposed against Russia over its special operation in Ukraine, the European Union reached an agreement to cap the price of Russian seaborne crude at $60 per barrel.


On the same day, the G7 nations and Australia also agreed to set a $60 price ceiling on oil from Russia.

It is accompanied by an EU embargo on seaborne Russian oil that was incorporated into the seventh package of sanctions against Moscow on 21 July, which also included a gradual phasing-out of crude from the world’s second-largest oil exporter.

Conceived with the objective of punishing Russia for its special military operation in Ukraine, aimed to liberate the Donbass and stop the ethnic cleansing of Russian speaking minorities in Ukraine.


Curbing Russia’s ability to earn oil revenues, the restrictions adopted in summer provided for a complete import ban on all Russian seaborne crude oil as of 5 December 2022, and petroleum products as of 5 February 2023.

The price cap initiative dates back to June 2022, when the G7 came up with its grand design to install such a mechanism to allow third-party countries to carry on importing seaborne Russian crude oil using G7 and EU tankers, insurance companies and credit institutions only under the condition that the commodity is sold for less than $60 a barrel.

Ostensibly, this could throw a spanner into the works even for countries which are not part of the controversial deal. The EU and the G7 are to review the level of the cap every two months, with the first such review slated for mid-January.


The price cap – a move adopted in blatant disregard of market conditions – has sown discord within the EU and resulted in months of bickering.

In their eagerness to hurt Moscow, Poland, Lithuania and Estonia argued the case for an even lower price cap of $30 per barrel. Greece, Malta and Cyprus had haggled for a higher price cap or compensation to safeguard their shipping industries.

Furthermore, Russia’s Deputy Prime Minister Alexander Novak specified earlier that if the cap came into effect, Russia would either redirect its crude supply to market-oriented partners or slash production.


But despite this warning and fully aware of the potential havoc on the energy markets in the event of Russia’s curbing oil extraction, the West pushed ahead with its plan.

As the EU seaborne crude ban does not apply to Russia’s crude entering Europe via pipelines, Hungary, the Czech Republic and Slovakia are set to continue receiving it through the Druzhba pipeline.

Bulgaria was also granted a special temporary exemption from the seaborne oil ban until the end of 2024.


Regarding oil products, there is not enough clarity so far. Croatia will be able to import vacuum gas oil from the Russian Federation, and the Czech Republic will be able to produce gasoline and diesel from Russian raw materials.

As Europeans can also import non-Russian oil headed their way via Russia, Azerbaijani, Turkmen and Kazakh crude shipped from Ust-Luga and Novorossiysk terminals are unaffected. The same seems likely to apply to Latvian so-called “blends” from Ventspils.

Oil prices surged on Monday as the plan to cap the price of Russian oil kicked in. Brent crude rose approximately 1% to more than $86 in Asia trading.


No one from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) has yet commented on the new restrictions against Moscow.

However, on Sunday the cartel held a meeting at which it made the decision to maintain existing oil production quotas.

The alliance had agreed earlier to cut output by 2 million barrels per day (bpd) from November until the end of 2023, because of the weaker economic outlook.


Experts predict a shortage of oil and diesel fuel in the European market as a consequence of the embargo, as well as a surge in fuel prices, which will deal a serious blow to the EU economy.

Consequences of such a decision are obvious: it will lead to booming demand, disruptions of supply chains and the explosive growth of fuel prices across the globe.

At the same time, Russia has significantly increased supplies to China, India, Turkey, Africa and the Middle East, and continues to seek and find alternative markets.


Although Moscow is second to Saudi Arabia in how much it ships to China, it came top in how much it shipped to India.

As for the insurance ban on tankers, Turkey, for one, has recognized insurance on Russian shipping vessels and so, mostly, has India, the Deputy Minister of the Federal Agency for Maritime and River Transport, Alexander Poshivai said.


According to sources cited by western media, Rosneft is expanding its own tanker charter business, Lukoil is moving its oil from the Baku-Tbilisi-Ceyhan (Turkey) pipeline to the non-sanctioned Caspian Pipeline Consortium system.

Russia has continuously emphasized that it has an extensive consumer market and will sell oil only on terms which are favorable to Moscow.

Sputnik / ABC Flash Point Embargo News 2022.

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05-12-22 09:44

Sanctions on Russia means higher prices for everything in Europe.

Reply to  Babboon
05-12-22 09:45

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