The European Union is contemplating a temporary freeze on its price cap for Russian oil amid the ongoing conflict in the Middle East, as reported by sources familiar with the discussions.
Last year, the EU established a dynamic mechanism that automatically adjusts the price cap for Russian Urals crude every six months, setting it 15% lower than the average market price. Currently, the cap stands at $44.10 per barrel and is scheduled for review later this summer.
Under the existing cap, European companies are prohibited from providing services including insurance and transportation for oil sold above the price threshold. However, recent oil price escalations have been associated with the conflict in Iran and the effective blockade of the Strait of Hormuz. The upcoming review in July is expected to raise the cap to at least $65 per barrel, surpassing the previous $60 threshold agreed upon by the Group of Seven (G7), according to sources who spoke on condition of anonymity.
Options under consideration for the new sanctions package include maintaining the current cap, delaying automatic increases until the end of the year due to the exceptional circumstances in the Middle East, or setting a new cap at $60, in line with G7 levels.
This initiative would form part of the EU’s 21st sanctions package since Russia’s full-scale invasion of Ukraine in 2022. The EU aims to finalize and formally present the new measures by early June, having briefed member-state envoys on the plans last week.
Additional measures being discussed include targeting more banks, oil traders, and refineries, as well as crypto operators in third countries aiding Russia’s attempt to bypass EU restrictions. Approximately 20 additional tankers associated with Russia’s oil transport will also be sanctioned, with plans to extend this approach to ships carrying liquefied natural gas (LNG), thereby constraining the Kremlin’s ability to establish a shadow fleet.
Despite extensive sanctions imposed on hundreds of vessels, a complete ban on maritime services is not likely to be included in the new package. Several member states resist this approach due to the volatility in the Middle East, especially if it lacks broader G7 support.
The new sanctions aim to further restrict Russia’s energy revenues and financial sector while undermining its military supply chain. Adoption of sanctions requires unanimous consent from all member states, meaning plans may evolve before finalization. Nations with significant maritime interests, such as Greece, have expressed concerns over changes to price caps, while other capitals are particularly attuned to their energy and trade interdictions.
In addition, proposals for the upcoming package involve trade restrictions on critical minerals, metals, and ores utilized in Russia’s aerospace sector and drone operations against Ukraine. The EU is also looking at export controls on around two dozen companies in China, India, Turkey, and Central Asia allegedly providing restricted goods that contribute to Russia’s weaponry.
The EU is in the preliminary phases of evaluating support options for Euroclear Ltd., following a Moscow court ruling that permits the Central Bank of Russia to potentially claim its assets. This follows the EU’s decision to indefinitely freeze approximately €210 billion ($245 billion) in Russian central bank assets. Most of these funds are funneled through Euroclear.
The EU plans to sustain the immobilization of these assets until the conflict concludes and reparations to Ukraine are settled. However, some member states, including Belgium, have opposed efforts to outright seize these assets.
Discussions regarding a visa ban on former combatants are also underway, sources reported. The European Commission, which oversees the EU’s sanctions initiatives, did not respond immediately to requests for comment.
