Ukraine war: EU countries agree new sanctions on Russia that includes a price cap on Russian oil

The European Union has approved new sanctions against Russia, including a price cap on Russian crude oil and refined products.

It comes in direct response to the illegal annexation of four Ukrainian regions.

The latest sanctions, approved on Wednesday morning by EU ambassadors, also introduce new exports and imports ban, as well as a brand-new provision that would prevent EU nationals from sitting on governing boards of Russia’s state-owned companies.

New individuals and entities accused of undermining Ukraine’s territorial sovereignty are being added to the extensive blacklist.

The oil cap was agreed in principle by the G7 in early September and needs to be transposed into EU law in order to make it effective and enforceable.

Western countries intend to forbid their insurance and shipping companies from providing services to Russian tankers that sell oil at a price that exceeds the agreed-upon cap.

Commercial oil tankers need insurance to cover the costs of incidents beyond their control, such as delays, damage to supplies, theft or even war.

EU and UK-based insurers enjoy a dominant position in this services market, making it difficult for Russian vessels to find coverage elsewhere.

The shipping industry of Greece, Cyprus and Malta plays a key role in transporting Russian oil around the world.

Discussions among EU ambassadors focused on addressing the concerns of these three coastal countries, who fear their business opportunities will be captured by countries like Liberia, Panama or the Marshall Islands.

The oil cap is meant to have an extraterritorial dimension because once implemented, it will affect international trade beyond the EU and the G7 borders.

The EU is already phasing out imports of Russian oil under a gradual embargo.

“This oil cap will help reduce Russia’s revenues and keep global energy markets stable,” European Commission President Ursula von der Leyen said last week while unveiling the proposal.

The new package of EU sanctions simply provides the “legal basis” to underpin the oil cap.

The ground-breaking initiative will now go back to the G7’s table, where the price range of the cap and other practical details will have to be defined.

It’s still unclear how many countries outside the G7 will be willing to participate in the untested scheme, which in practice amounts to the establishment of a cartel.

India and China have in recent months ramped up purchases of Russian oil that Moscow sells with a pronounced discount. The current difference between a barrel of Brent and Urals crude is $23.

Besides the oil cap, the new round of sanctions introduces stricter import bans to keep certain Russian products out of the EU market and deprive the Kremlin of €7 billion in revenues, according to Commission’s estimates.

Exports of EU-made goods, particularly key technology used in the Russian military, such as aviation, electronic and chemical components, will also be prohibited.

The exact list of products has not yet been made public.

The eighth package of sanctions will enter into place after its publication in the EU’s official journal.