Russia Products Price Caps Set at $100 and $45

EU ambassadors reached agreement Friday on price caps for Russia's exports of refined products that will take effect on Sunday, Feb. 5. The US and other non-EU members of the G7 also signed off on the caps.

Caps were set at $100 per barrel for lighter, higher-value products such as diesel and $45/bbl for heavier, lower-value products such as fuel oil.

The European ambassadors, meeting in Brussels, also agreed to make no change to a $60/bbl price cap for Russia's crude oil exports that took effect on Dec. 5.

"The price cap for crude oil is not being changed for the moment. It is clear that the oil price cap is having its desired effect," said a spokesman for the the EU's current Swedish presidency. The crude price cap will be reviewed again in March, he added.

A US official said countries implementing the price cap want to have a chance to see where prices will settle after "wind-down" periods before making any changes

The EU has banned most imports of Russian crude oil and a similar broad EU ban on imports of refined products will take effect on Feb. 5.

The complementary G7 price cap regime applies to Russian oil exports to third countries. Specifically, it prohibits the use of shipping or insurance services provided by EU or G7 companies, unless the oil is purchased at or below the price caps.

Targeting Moscow's Revenues

The G7 — whose non-EU members are the US, the UK, Canada and Japan — has largely left the task of setting the price caps to the EU, because Europe was the main export market for Russia's oil before the invasion of Ukraine.

The price caps were designed to keep Russian oil flowing into the global market while limiting revenues that could be used to fund Moscow's year-old war in Ukraine.

Russia's oil and gas revenues have indeed fallen, but that process had already started soon after the war began, as Russian oil producers offered deep price discounts to willing buyers when traditional European customers started to shun Russian oil.

The big price discounts help to offset the higher costs of shipping Russian oil from ports in the Baltic and Black Seas to India and other distant destinations.

The levels agreed on Friday for the price caps for refined products were unchanged from the original European Commission proposal seen by Energy Intelligence.

Poland, Estonia, Latvia and Lithuania had previously succeeded in negotiating a lower level for the crude oil price cap, but this time their efforts failed to secure lower levels for the products caps and an immediate downward adjustment of the crude cap.

UK officials estimate that around 45% of Russian oil export revenues in 2022 came from its overseas sale of refined products, which are dominated by four products — diesel, vacuum gas oil, fuel oil and naphtha.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact