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G7 Coalition Implements Price Cap on Russian Oil Products

This Sunday, February 5, the European Union, alongside the United States, the United Kingdom, Canada, France, Germany, Italy, Japan and Australia, will be implementing a price cap on Russian oil products.[0] The European Commission's proposal will take effect from Sunday, and is aimed at reducing the Kremlin's revenues from oil exports in response to its invasion of Ukraine.[1]

The G7 coalition price cap will be set at $100 per barrel for diesel, kerosene and gasoline, which trade at a premium to crude oil, and $45 per barrel for fuel oil and other products that trade at a discount to crude oil.[2] This applies to Russian fuel cargoes shipped on vessels owned by companies based in the EU or G7.[3]

The agreement between the US, the G7, the European Union and Australia is an effort to limit Moscow's funds for its invasion of Ukraine. The sanctions measure is designed to reduce Russian revenues while recognizing the importance of stable energy markets and minimizing negative economic effects.

The ban on seaborne imports of Russian refined oil products and the price cap are intended to work in parallel to trim Russia’s income while avoiding a major shock to global energy markets. [4]

The price cap system will bar access to ships, marine insurers and services unless the refined oil products are purchased for a price at or below an agreed limit.[5] The EU ban and the G7 caps are set to come into force at the same time, so that Western shipping firms and insurance companies can continue facilitating Russian oil exports sold at or below the cap level.[6]

0. “European Union and Australia agree to new moves to hinder Putin’s war” Sky News Australia, 4 Feb. 2023, https://www.skynews.com.au/world-news/vladimir-putin-to-be-hit-with-tenth-round-of-sanctions-as-g7-european-union-and-australia-agree-to-price-cap-on-russian-petroleum-products-amid-ukraine-war/news-story/f1b750ee6efa6cfc13b7b4802eb05f31

1. “European Midday Briefing: Stocks Hit by -2-” Morningstar, 6 Feb. 2023, https://www.morningstar.com/news/dow-jones/202302062854/european-midday-briefing-stocks-hit-by-2

2. “G7, EU, Australia agree on price caps for Russian petroleum products” NHK WORLD, 4 Feb. 2023, https://www3.nhk.or.jp/nhkworld/en/news/20230204_10

3. “EU Embargo On Russian Oil Products Enters Into Effect” OilPrice.com, 6 Feb. 2023, https://oilprice.com/Latest-Energy-News/World-News/EU-Embargo-On-Russian-Oil-Products-Enters-Into-Effect.html

4. “EU countries agree on new price cap for Russian oil” NL Times, 4 Feb. 2023, https://nltimes.nl/2023/02/04/eu-countries-agree-new-price-cap-russian-oil

5. “Europe bans Russian diesel and other oil products” NPR, 3 Feb. 2023, https://www.npr.org/2023/02/03/1153833640/europe-russian-oil-products-ban

6. “EU talks on fresh Russian oil price caps go to the wire” POLITICO Europe, 1 Feb. 2023, https://www.politico.eu/article/eu-commission-talks-russian-oil-product-price-caps/

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