EU's Floating Price Cap Proposal on Russian Oil: A New Sanction Strategy

The European Commission proposed on Friday a flexible pricing cap on Russian oil, sought to be pegged at 15% below the quarterly average market price. EU diplomats disclosed that this move stems from efforts by the EU and Britain to further hinder Russia's financial resources amid the Ukraine conflict.

Initially agreed upon by the Group of Seven nations back in December 2022, the price cap had experienced reduced impact following fluctuations in oil futures. Brent crude prices had seen a rebound, with a recent settlement at $70.36 per barrel, sparking concerns over the efficacy of the existing $60 cap.

Technical details of the proposal need further discussion, diplomats acknowledged, specifically to address apprehensions from EU's maritime members, namely Malta, Greece, and Cyprus. The European Commission had earlier suggested a cap reduction as part of broader sanctions, facing challenges in securing U.S. approval. Notably, Russia's Urals crude currently trades slightly below the cap.

(With inputs from agencies.)