The EU and the G-7 study imposing a limit on the price of Russian oil derivatives | International | The USA Print

A service station of the Russian oil company Lukoil in Romania.
A service station of the Russian oil company Lukoil in Romania.MARTON MONUS (REUTERS)

The European Union is looking for new formulas to prevent Russia from continuing to finance its war in Ukraine. The European Commission is already studying a new round of sanctions against Moscow —the tenth— for the invasion that is going to be one year old, and another measure can be added to the list of entities and people vetoed in the EU that seeks to hit the Russian economic system based in the hydrocarbon trade. The European Commission proposes to the Member States to impose a limit on the price of Russian oil derivatives that varies between 100 euros per barrel if it is gasoline, diesel or aeronautical fuels or a discount of 45 euros per barrel in the market price in the case of paraffins or products used in the chemical industry, according to the draft sent to the countries to which EL PAÍS has had access. The measure would be imposed jointly with the G-7 countries that are not part of the community club (United States, Japan, United Kingdom and Canada), sources from the negotiation point out.

In December, the EU and the G-7 already imposed a cap on the price of oil that was set at $60 or 5% below the market price cap and agreed to review that cap. Now, a group of countries —mainly Estonia, Latvia, Lithuania and Poland— are demanding that this review be done now and for more than that 5%, to continue reducing the power of the economic machinery that sustains the war. Meanwhile, on February 5, the ban on buying oil derivatives from the Urals that the G-7 countries and the EU imposed on themselves came into force. However, both measures are limited in scope, as they only affect a number of countries; and some of them, such as the United States, Canada, the United Kingdom or Spain, were not large clients of Moscow and its hydrocarbon companies.

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The solution found by the G-7 and the EU to broaden the impact of the sanction was to approve a cap on the prices of crude oil or derivatives for third countries. And why would these other States accept it? Western companies involved in oil purchase and sale operations have a large participation in the fuel market (shipping companies, insurers, reinsurers, guarantors). These companies, in principle, are prohibited from participating in these transactions, unless that foreign country accepts the limit set by the West.

This Friday the EU countries have studied in the Council of the European Union the proposal of the European Commission. It has been a first exchange of opinions in which everyone’s positions have already been seen. As is usual every time the negotiation of a new sanctions package is opened, there is a group of countries (Poland, Estonia, Latvia and Lithuania) that is in favor of being tougher with Moscow. And this is what has happened again this time.

The first meeting of the ambassadors of the EU countries has ended with a broad consensus on price limitations and on the products derived from Russian crude oil to be sanctioned, sources from the negotiation point out. Another debate has been what to do with the caps already imposed on oil directly. The Baltics and Poland seek to reduce more than what was agreed in December. The proposal does not please some in Brussels, starting with the Commission, where they believe that the measure has worked well so far. Since it came into effect, the Ural crude oil price has remained below those 60 dollars practically all the time. On the other hand, Brent, the benchmark for the oil market in Europe, has remained in a range between 75 and 90 dollars. This situation has the advantage that it subtracts resources from the Russian coffers without taking it off the market, so that the pressure on prices does not increase.

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