Russian oil, in addition to the EU embargo, today the price cap also enters into force – Corriere.it

The European embargo on Russian oil by sea (which will be followed on 5 February by that on refined products) kicks off today, combined with the introduction decided by the Council of the European Union of a ceiling of 60 dollars a barrel for the marketing of oil by sea Russian crude to third countries.

The estimates

According to Commission estimates, these measures will block about 94% of Moscow’s crude destined for Europe. The ceiling on crude oil prices agreed with the G7 (plus Australia) will play an important role. Russia – specifies a senior EU official – depends on the various services linked to the G7 plus, such as transport, insurance or financing, to move 1 million barrels a day: it will be difficult for them to find alternatives in the short to medium term.

The roof

The mechanism of price cap it provides for a ban on European or third-country operators from using European maritime services – transport, insurance, financing, intermediation – if the crude oil is sold at a price higher than the fixed ceiling. The adjustable cap, in order to respond to market developments (it will be reviewed every two months), even if the target is always 5% below current prices, given that the European objective is not to intervene on oil prices, but to reduce Russian revenues intended for the financing of the war in Ukraine. The ceiling for refined products will be set at a later time, before the entry into force of the embargo for this type, scheduled for February 5th.

Come in

While the EU ban on importing Russian crude and oil products by sea remains in full force, the price cap will allow European operators to transport Russian oil to third countries, provided its price remains strictly below the limit, explains the Council in a note. The price cap was specifically designed to further reduce Russia’s revenues while keeping global energy markets stable through continued supplies. It will therefore also help fight inflation and keep energy costs stable at a time when high costs – especially high fuel prices – are a major concern in the EU and throughout the world.

Transition

a 45-day transition period is foreseen for Russian crude purchased by sea above the price limit, provided it is loaded onto a ship at the port of loading before 5 December 2022 and unloaded at the port of final destination before 19 January 2023, specifies the Council, emphasizing that there is no equivalent provision for petroleum products. If the cap is changed by the Coalition, a ninety (90) day transition period is foreseen for maritime services and maritime transport of Russian crude oil (and petroleum products). The cap provides for various sanction mechanisms in the event of exclusion. If a third-country flagged vessel intentionally carries Russian oil above the cap, EU operators will be prohibited from insuring, financing and servicing this vessel for the carriage of Russian oil or oil products for 90 days after the loading unloaded state; if an EU vessel, or an EU-flagged vessel, breaches the roof, it will be subject to the consequences set out in the national legislation of each Member State.

Sanctions

EU sanctions – specifies the Council – apply within the jurisdiction (territory) of the EU, to EU citizens anywhere, to companies and organizations incorporated under the law of a member state — including branches of EU companies in third countries, as well as on board aircraft or vessels under the jurisdiction of the Member States. The ban on transporting Russian oil by sea applies to all EU vessels, i.e. vessels flying the EU flag, as well as vessels owned, chartered and/or operated by EU companies or citizens. This also affects agents acting on their behalf.