Dhe concept seems audacious at first: the European Union and its partners such as the G7 and Australia want to tell their opponent Russia the price at which it can sell its oil on the world market. The price cap should initially be 60 US dollars, i.e. around 57 euros, per barrel – the EU states agreed on Friday evening after a long back and forth. On the night of Saturday, the seven leading democratic economic powers and Australia announced their participation. The price cap is to apply from this Monday, and thus come into force parallel to the EU oil embargo against Russia.
The goal is to squash Russian oil revenues, making it more difficult to finance the war against Ukraine. On the other hand, Russia should certainly continue to market oil. Otherwise the valuable resource would become even scarcer on the world market and prices would also rise in the West.
So Russia is supposed to sell oil at a cheap price dictated by the West – can that work? It is an experiment with many unknowns that could also affect consumers in Germany.
How does the price cap for Russian oil work?
For the price cap, the EU is leveraging the transport and the necessary services such as insurance. According to Brussels officials, European shipping companies operate more than half of all tankers in the world. The principle is: Shipments of Russian oil to third countries are prohibited – unless the price of the load is not higher than the cap. In other words, if the price limit is adhered to, Western shipping companies can continue to bring Russian oil to India, China or other countries with their ships. The same regulation should apply to services such as insurance, technical assistance, financing and brokerage services.
What could the action do?
The hope is that the price ceiling will ease the tension on the energy markets and relieve third countries. It is also intended to ensure that Russia no longer benefits from rising oil prices and can thus fill its war chest. According to Estonian Prime Minister Kaja Kallas, every dollar less per barrel (159 liters) could reduce Russian oil revenues by two billion dollars or the equivalent of 1.9 billion euros a year.
Why the oil price cap – isn’t there already an embargo?
The project was largely driven by the Americans, who feared that the European ban on imports could drive up prices for non-Russian oil and, by extension, gasoline. In addition, the regulation for the embargo did not provide for a transport ban. Tankers from European countries could therefore have continued to transport Russian oil to third countries – even expensive oil.