EU considers freezing price cap on Russian oil as war in Middle East pushes up energy prices | Today’s news

The European Union is considering temporarily freezing its price ceiling on Russian oil as surging energy markets driven by the ongoing war in the Middle East threaten to push the bloc’s automatically adjusted threshold well above the level originally set by the Group of Seven, potentially blunting one of the West’s central tools for curbing Moscow’s wartime income.

The proposal is being considered as part of the EU’s 21st sanctions package against Russia since the full-scale invasion of Ukraine in 2022, with Brussels aiming to finalize and formally present the new measures in early June. Member state envoys were briefed on the plans last week, according to people familiar with the matter, who spoke on condition of anonymity to discuss private negotiations.

How the Russian oil price cap works and why a freeze is now being considered

The EU uses a dynamic pricing mechanism that automatically sets a price ceiling at 15 percent below the average market rate for Russian Urals oil every six months. The current limit is $44.10 per barrel and is due to be reviewed later this summer.

Under the arrangement, European firms are prohibited from providing services, including insurance and shipping, in connection with Russian oil sold above this level.

The trouble, people familiar with the discussions say, is that the Iran war and the effective closure of the Strait of Hormuz have sent oil prices soaring. Under the current formula, the July revision would likely push the ceiling to at least $65 a barrel, well above the previous threshold of $60 set jointly by the G7.

Three options the EU is considering for a Russian oil price ceiling

Officials are examining at least three approaches. The first would completely freeze the cap at the current level of $44.10 per barrel. The second would suspend the dynamic automatic adjustment mechanism until the end of the year, citing exceptional circumstances in the Middle East. A third would allow the cap to be raised but limit any increase to $60 a barrel, restoring alignment with the G7 threshold.

No final decision has been reached and people have warned that plans could change before any formal proposal is presented to member states. Sanctions require unanimous support from all 27 member states before they become legally effective.

EU’s 21st sanctions package against Russia targets energy revenues, banks and shadow tanker fleet

In addition to the price cap, the package under discussion includes a broad set of measures aimed at tightening EU control over Russia’s energy income and its financial sector. The bloc is considering new designations covering banks, oil traders, refiners and cryptocurrency operators in third countries that Moscow has used to circumvent existing restrictions.

About 20 more tankers would be sanctioned as part of ongoing efforts to dismantle the shadow fleet of vessels on which Russia depends for its oil exports. The EU has already sanctioned hundreds of ships and the new package would extend the regime to vessels providing services to these tankers. Over time, this approach is expected to include ships carrying liquefied natural gas, limiting Russia’s capacity to build a parallel shadow fleet for LNG.

Why a total ban on maritime services remains off the table for now

Despite the scope of the proposed package, a comprehensive ban on maritime services is unlikely to emerge. Several member states remain opposed to the move, citing increased volatility caused by the conflict in the Middle East and saying such a measure would require wider G7 support to be considered viable.

Seaside countries, including Greece, have often rejected changes to the price cap mechanism, while other capitals have raised concerns over what they see as their energy security and business interests.

The main goals of the new package, the people said, are to further tighten pressure on Russia’s energy revenues and its financial sector, as well as deny the military industry access to essential supplies.

EU sanctions will target dozens of companies in China, India, Turkey and Central Asia

The package also proposes controls on the exports of about two dozen companies, including those based in China, India, Turkey and Central Asia, which allegedly continue to supply Russia with restricted goods found in or required for the production of weapons systems.

Other trade restrictions are being considered on critical minerals, metals and ores used in Russia’s aerospace sector, as well as in the production of drones it deploys against Ukrainian cities. Technologies related to jamming are also being examined.

Euroclear under scrutiny after Moscow court rules on €210 billion in asset freezes

The EU is in the early stages of exploring ways to support clearing house Euroclear after a Moscow court ruling raised the possibility that Russia’s central bank could seize its assets.

The decision came after the EU invoked emergency powers to extend indefinitely the freeze of up to €210 billion (about $245 billion) of Russian central bank assets, most of which are held through Euroclear. The bloc intends to keep those funds frozen until the war ends and Russia agrees to pay reparations to Ukraine. Several member states, including Belgium, opposed any efforts to seize the property outright.

Visa bans on ex-combatants remain on the agenda

Discussions about imposing visa restrictions targeting ex-combatants are continuing, the people said.

The European Commission, the bloc’s executive arm responsible for coordinating EU sanctions efforts, declined to comment.