G7 debates tighter Russian oil price cap amidst new sanctions
European Commission spokesman Olof Gill said on Monday that the G7 countries will consider lowering the price cap on Russian oil. The Northern EU countries—Sweden, Finland, Denmark, Lithuania, Latvia, and Estonia—have appealed for the limit, which has been set at $60 per barrel since 2022.
In a letter addressed to the EC, the six countries argued that the time has come to enhance the impact of sanctions imposed on Russia due to its invasion of Ukraine by lowering the price cap introduced on Russian oil in December 2022.
They want to lower the price cap on Russian oil
The price level of $60 per barrel was set by the G7 countries, which include economically strong democracies like Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Union.
In a letter seen by PAP, Sweden, Finland, Denmark, Lithuania, Latvia, and Estonia pointed out that restrictions on oil exports are crucial because they "reduce Russia's most important source of revenue." These countries argue that the price can be reduced as the international oil market is currently better supplied than in 2022. This reduces the risk that a lower price cap might cause a supply shock, the signatories indicated.
"Considering limited storage capabilities and disproportionately high dependence (of Russia) on energy exports for revenue, (the country) has no alternative but to continue exporting oil even at a much lower price," the letter stated.
According to these six countries, efforts to lower the price cap on Russian oil should be accompanied by actions against the so-called shadow fleet (ships illegally transporting Russian oil) and entities facilitating Russia's oil trading above the imposed price cap.
"We have received the letter. It will become part of the ongoing debate in the G7. Ultimately, it's up to the G7 partners to make a decision on this matter," the European Commission spokesman said on Monday. He noted that EU member states will have to unanimously agree on a lower price cap.
Tankers with Russian oil stuck off the coast of China
Bloomberg reported on Monday that three tankers carrying Russian oil are stuck off the coast of China due to the latest American sanctions. The Friday sanctions package listed them among 183 units of the so-called shadow fleet, which transports Russian oil at prices above the established cap of $60 per barrel.
When implementing the sanctions, representatives of the US administration emphasized that this most severe package of restrictions imposed so far should cause losses in Russia reaching billions of dollars monthly.
On Friday, the White House imposed comprehensive restrictions on over 400 entities, including two of Russia's largest oil producers, Gazprom Neft and Surgutneftegaz, responsible for over a quarter of the country's oil exports.
