EU reaches agreement on Russian fuel price caps

European Union (EU) member states on Friday reached agreement on price caps for Russian petroleum products, ahead of an international embargo set to go into force over the weekend, officials said.

EU diplomats said the levels agreed were $100 for more expensive fuel such as diesel, and $45 per barrel on lower-quality products such as fuel oil and heating oil.

Sweden, which holds the rotating EU presidency, called it an “important agreement as part of the continued response by EU and partners to the Russian war of aggression against Ukraine”.

The move is the latest part of an international push to limit Russian President Vladimir Putin’s war chest for his assault on Ukraine by targeting his key exports.

The EU in December imposed an embargo on Russian crude oil coming in by sea and — together with its G7 partners — set a $60-dollar-per-barrel cap for exports around the world.

The second EU-wide embargo, on Russian fuel, is set to come into force on Sunday. It targets Russian refined oil products such as petrol, diesel and heating fuel, arriving on ships.

At the same time, the EU and the G7 group of wealthy democracies have also agreed to impose a price cap on Russian shipments of those products to global markets.

The price caps on those transported products work by establishing a ceiling for the cost of fuel that can be transported on EU ships.

The price caps agreed were in line with a proposal from the European Commission, the EU’s executive arm.

It had to balance tough demands from sanction hawks, such as Poland and Baltic nations, against the need to ensure the West does not cut off Russian supplies to world markets entirely, which would send global prices soaring.

EU diplomats called the agreed price levels “well-balanced” and hitting the goal to “reduce Russia’s income while guaranteeing access for third countries”.

– Kremlin warns of market ‘imbalance’ –

The Kremlin lashed out at the EU ahead of the embargo coming into force, insisting it will “lead to a further imbalance of the international energy markets”.

“We are taking measures to hedge our interests against the risks associated,” Kremlin spokesman Dmitry Peskov told reporters.

Moscow’s war in Ukraine has provided a harsh wake-up call for the EU, which for years had been reliant on cheap fossil fuels from Russia to power its industries.

Brussels says the embargo on crude oil has seen the bloc cut out some 90 percent of Russian imports, after exceptions were granted for supplies flowing by pipeline to landlocked countries like Hungary.

European Commission president Ursula von der Leyen on Thursday estimated during a visit to Kyiv that the existing price cap on Russian oil was already costing Moscow around 160 million euros ($175 million) every day.

On Friday, she said the bloc was readying a new round of sanctions against Russia — it’s 10th package since the war started a year ago.

“We must continue to deprive Russia of the means to wage war against Ukraine,” she said, also highlighting the EU’s import ban on Russian petroleum products from Sunday.

“With the G7 we are putting price caps on these products, cutting Russia’s revenue while ensuring stable global energy markets,” she said.