The EU imposes a limit on the price of Russian oil derivatives | International

The European Union already has a cap on the price of Russian oil derivatives ready. It will be 100 dollars per barrel for the so-called premium products (diesel, fuel for aircraft) and a discount of 45 dollars per barrel for the rest (paraffins, products for the chemical industry). This measure complements the one approved in December, which directly imposed a limit for crude oil, in this case of 60 dollars or 5% below the market limit price. The punishment, which is added to the other sanctions approved for the invasion of Ukraine, will be applied by both the EU member states and the G-7 countries.

The deadline for this sanction to the Russian oil industry to be ready ended this Sunday. On February 5, the veto on the purchase of crude oil derivatives from the Urals that the EU countries imposed on themselves comes into force. Something similar happened in December with unrefined crude. On December 5, the veto on the purchase of this product was activated, something already agreed upon in May by the community partners, and days before it came into force it was complemented with a price cap.

Price caps are not directed at EU and G-7 countries. These, with the exception of the crude that arrives by pipeline (mainly Hungary), agreed in the spring to stop buying oil from the Urals and its derivatives in December and February, respectively. It sought to subtract many billions of income from the Kremlin and stop financing its war machine against Ukraine, since only in 2021 these imports exceeded 70,000 million euros.

But this measure has a limited impact, since it is only addressed to those who voluntarily assume it. So to win supporters the EU and the G-7, that is, the Twenty-seven plus the United States, Canada, the United Kingdom and Japan, decided to create these caps on products traded on world commodity markets. The intention is for more countries to voluntarily join the sanctions. Why would they have to? Because Western companies (shipping companies, insurers, reinsurers, intermediaries) have an overwhelming presence in this type of transaction and cannot participate in these operations if the purchasing country does not assume the cap.

The negotiation on this occasion has been much faster than the first time. Then Poland's demands to impose a lower limit greatly delayed the pact. This time, Warsaw and the countries that were harshest with Russia (Estonia, Lithuania and Latvia) also demanded more ambition in the punishment, although they did not ask for it so much for crude oil derivatives as for unrefined crude, since two months after the approval of the measure this needed to be reviewed.

The rest of the partners and the European Commission itself have disagreed with this vision. The Community Executive points out that the cap applied in the last two months is working and fulfills its double objective: to subtract income from Russia and, at the same time, keep Ural oil on the market so that prices do not skyrocket. Since it came into effect, the price of Russian crude oil has remained below those 60 dollars practically all the time. On the other hand, Brent, the benchmark for the oil market in Europe, has remained in a range between 75 and 90 dollars.

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