EU considers price cap of $65-70 on Russian oil

The European Union, in coordination with the G-7 nations, is discussing capping the price of Russian crude oil at between $65 and $70 a barrel, according to people familiar with the matter.

EU ambassadors are meeting on Wednesday with the aim of approving the cap mechanism and a proposed price level. If they do, the EU and G-7 could announce the price cap level later Wednesday, the people said.

The $65-$70 range is well above Russia’s cost of production and higher than some countries had been pushing for. Russia is already selling its crude at discounts, so a high cap may have minimal impact on trading.

The G-7 is expected to settle on a figure from within the $65-$70 range, some of the people said, but several EU diplomats said the proposed level was too high. The cap needs the backing of all member states to be approved.

The price cap would ban companies from providing shipping and services, such as insurance, brokering and financial assistance, needed to transport Russian oil anywhere in the world unless the oil is sold below the agreed threshold. The cap plan, which is being driven by the G-7, has two aims: keeping Russian oil flowing in order to avoid global price spikes, while at the same time limiting Moscow‘s revenues.

The EU has also proposed adding a number of grace periods to its latest version of the cap legislation and has significantly narrowed the penalties on shipping provisions.

Most G-7 nations and the EU plan to stop importing Russian crude this year. Provisions for refined petroleum products, including a cap on those prices, are due to come into force in February.

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