EU agrees oil price cap in new Russia sanctions plan

EU ambassadors reached an outline agreement on new sanctions to hit Vladimir Putin’s war with Ukraine, including a price cap on Russian oil sales, according to seven European diplomats.

The package, which is the 8th round against Moscow, was proposed by European Commission President Ursula von der Leyen last week, after the Russian president threatened to use nuclear weapons and mobilised hundreds of thousands of reservists.

A range of EU countries had raised concerns over the new measures, especially on the oil price cap, and details still need to be signed off in writing.

The EU has been working to make Putin “pay” for his escalation of his invasion, which included holding sham referendums in order to annex four regions of Ukraine.

Since the invasion began in February, the Kremlin’s war chest has swelled from tens of billions of euros of fossil fuel sales to Europe, though EU governments have stepped up efforts to move away from Russian energy.

A ban on most crude oil imports from Russia will come into force in December, and the latest sanctions plan builds on those measures. Coal imports have already been phased out and gas supplies from Russia to Europe have been severely disrupted — first by Putin’s power games and then by the sabotage of two undersea Nord Stream pipelines.

For European leaders, the task has been to find new ways to target Moscow’s income from energy while avoiding the risk of shortages, soaring prices, and potential blackouts at home this winter.

Tuesday’s outline deal was agreed in the room at a meeting of ambassadors, who are expected to approve the final version of the text on Wednesday, the diplomats said, speaking on condition of anonymity because the discussions were private.

The draft measures provide for the legal basis of the price cap, which was previously agreed by G7 countries. There is no decision yet on the actual price, or the price range, of the future cap, though the U.S. has suggested this will come within weeks.

Malta, Greece and Cyprus, whose tanker fleets transport most Russian oil, were worried about the impact of the cap on oil prices on their shipping industries. This led to some concessions toward those countries, according to a draft of the text dated Monday and seen by POLITICO.

For example, the draft mentions a monitoring system by the Commission, which would asses circumvention practices such as the reflagging of vessels. If the Commission finds “significant loss of business” due to these evasive practices, it would “propose measures to mitigate” the impact of these techniques to evade the price cap measure.

The package also aims to hit the Russian steel industry and deprive the Kremlin’s military of key technologies. It includes more measures against individuals assisting Russian President Vladimir Putin’s war effort. It also bans EU nationals from sitting on governing boards of Russian state-owned enterprises.

The history of EU sanctions packages has been fraught. Hungary, for example, led opposition to plans for a complete ban on Russian oil imports, holding up the process for weeks until it secured exemptions for its own supply needs.

Given the tensions and difficulties in the past, some diplomats remained cautious even after Tuesday’s verbal agreement had been reached in the room. One said there remained a “limited” chance that the deal could still unravel, while another said that the preliminary deal “should be” finalized on Wednesday morning.

EU ambassadors were keen to have deal on the sanctions package by Wednesday at the latest. They did not want internal discussions on the discussion to overshadow the meetings of European leaders taking place in Prague on Thursday and Friday.