BRUSSELS — The European Union will not forge ahead with plans to impose a tough new price cap on the Russian oil exports funding the Kremlin’s war in Ukraine in light of concerns that a new conflict in the Middle East will drive up oil prices.
The proposal, which would have seen the maximum price of Moscow’s oil slashed from $60 per barrel to $45, was due to be discussed Monday in Brussels by foreign ministers from across the bloc.
However, two diplomats confirmed to POLITICO that the burgeoning conflict between Israel and Iran meant that the plan is no longer workable.
“The idea of lowering the price cap is probably not going to fly because of the international situation in the Middle East and the volatility,” said one diplomat, granted anonymity to speak frankly about the market-sensitive policy.
“At the G7 meeting this week, it was agreed by all the countries they would prefer not to take the decision right now,” the diplomat added. “The prices were quite close to the cap; but now the prices are going up and down, the situation is too volatile for the moment.”
At the G7 summit in Canada, European Commission President Ursula von der Leyen admitted the existing measures “had little effect — but in the last days, we have seen that the oil price has risen [and] the cap in place does serve its function … So for the moment, there’s little pressure on lowering the oil price cap.”
The pitch for a $45-per-barrel cap would translate into billions of dollars in lost oil revenues for Russia as it scrambles to maintain high levels of military spending and plug holes in its national budget.
After being initially proposed by Ukraine, the lowered price cap was included in the text of the EU’s 18th sanctions package, unveiled earlier this month. However, without support from United States President Donald Trump, implementing the idea would prove impossible, experts point out.
“Lowering the cap without a buy-in from the U.S. wouldn’t be effective,” said Maria Shagina, a sanctions expert at the International Institute for Strategic Studies. “Designed as a buyer’s cartel, the cap needs the U.S. to be part of it.”
Shagina also emphasized strengthening enforcement, “as currently around 90 percent of Russian crude is shipped over the price cap.”
Oil prices have climbed sharply in the days since Israel and Iran began trading strikes. European foreign ministers are meeting with their Iranian counterparts in Geneva on Friday, while Trump may order a strike against the Tehran regime’s best-reinforced nuclear sites.
The post Brussels to shelve push for Russian oil price cap amid Middle East chaos appeared first on Politico.
