Starting from Sunday, 5th February 2023, price caps agreed by the European Union will apply to Russian refined petroleum products. The Swedish presidency of the EU announced the agreement by Ambassadors of the 27 EU countries on Friday.
The European Union will set the price of refined petroleum products imported from Russia at $100 per barrel for diesel and $45 a barrel for products that trade at a discount, such as fuel oil and naptha.
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The price caps, together with an EU ban on Russian oil product imports, are part of a broader agreement among the Group of Seven (G7) countries. It follows a $60 per barrel cap on Russian crude that G7 countries imposed on Dec. 5. The US, Australia and other G7 members have already adopted the cap on seaborne crude oil. These measures are geared towards limiting Moscow’s revenue from oil, and thus its ability to fund its war in Ukraine.
The new cap on refined petroleum products has fueled fears of global supply disruptions, with diesel currently trading at U$110-120 a barrel, while crude oil is hovering around US$80.00.
The two caps prohibits Western insurance, shipping and other companies from financing, insuring, trading, brokering or carrying cargoes of Russian crude and oil products unless they were bought at or below the set price caps.
While there was a wind-down period of 45 days for Russian crude oil, there will be a 55-day transition period for sea-borne Russian oil products and loaded before Sunday.
The review of the price cap on crude oil was planned for mid-March, but Poland and Baltic states Latvia, Lithuania and Estonia has been pushing for an immediate review. Reuters reported that they want a lower price cap to curb Russia’s revenues from fuel.
However, Reuters report went further to say that regular reviews will set a price cap at least 5% below the average market price for Russian oil.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
