EU struggles to agree Russian oil product price cap, seeks Friday deal

The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 per barrel on premium Russian oil products such as diesel and a $45 cap per barrel on discounted products such as fuel oil.

The price cap numbers have to be approved by all 27 European Union member states. Their ambassadors will meet on Friday to attempt to reach a deal, three EU diplomats told Reuters.

International Energy Agency (IEA) chief Fatih Birol, speaking with reporters in Ottawa on Wednesday, reiterated his support for the price caps, saying he did not expect the proposal to cause major problems or disruption.

“There might be some transition difficulties, but we know that the second half of this year, a significant amount of new refinery capacity will come on line and we will see a lot of rerouting of the product around the world,” said Birol, whose agency makes policy recommendations on global energy.

Poland and the three Baltic states are still pushing for the caps to be set at lower levels to curb the revenues Moscow receives from selling fuel as much as possible following its invasion of Ukraine, the diplomats said.

One noted, however, that the EU has limited ability to change the price cap since it is a broader agreement among the Group of Seven (G7) countries.

The Feb 5. price caps and EU ban on Russian oil product imports follow a $60 per barrel cap imposed on Russian crude on Dec. 5 as G7 countries and the EU seek to limit Moscow’s ability to fund its war in Ukraine.

Both caps work by prohibiting Western insurance and shipping companies from insuring or carrying cargoes of Russian crude and oil products unless they were bought at or below the set price cap.

EU country ambassadors will also resume talks on Friday on extending sanctions to Belarus, to crack down on the circumvention of sanctions on Russia by companies routing banned products through its neighbour, the three diplomats said.