EU postpones lowering price cap for Russian oil amid tensions in Middle East, Politico reports
The European Union has postponed a move to lower the existing price cap on Russian oil, after concerns that the Iran-Israel conflict could lead to higher prices, Politico reported on June 20, citing unnamed diplomatic sources.
The price cap, introduced in December 2022 as a measure to limit the Kremlin's ability to finance its war against Ukraine, prohibits Western companies from shipping, insuring, or otherwise servicing Russian oil sold above $60 per barrel.
Ukraine has been calling on Western partners to lower the price cap on Russian oil from $60 to $30 per barrel. Meanwhile, two diplomats told Politico that the escalation of the conflict between Iran and Israel would make it impossible to impose new restrictions.
"The idea of lowering the price cap is probably not going to fly because of the international situation in the Middle East and the volatility," said one diplomat on the condition of anonymity.
The issue of reducing the price cap on Russian oil was discussed during the Group of Seven (G7) summit, which was held June 15-17 in Canada. However, the participants failed to reach a consensus.
"At the G7 meeting this week, it was agreed by all the countries they would prefer not to take the decision right now," the diplomat added. "The prices were quite close to the cap; but now the prices are going up and down, the situation is too volatile for the moment."
European Commission President Ursula von der Leyen said during the G7 summit that the existing measures on Russian oil exports "had little effect," while noting that oil prices had risen in recent days, so "the cap in place does serve its function. "
Global oil prices spiked on June 13, after Israeli strikes on Iran triggered a long-range war between the two countries that has continued for over a week.
Brent and Nymex crude prices surged more than 10% before stabilizing around 7.5% higher, with Brent at $74.50 a barrel and Nymex at $73.20 as of June 20, the BBC reported.
The spike threatens to undermine Western efforts to restrict the wartime revenue of the Russian state, which depend heavily on oil exports.
EU High Representative Kaja Kallas previously urged the European Union to pursue lowering the oil price cap on Russian oil, even without U.S. support, warning that Middle East tensions could otherwise drive prices up and boost Russia's revenues.