US$60 price cap and effect

On 6 October 2022, in the eighth package of sanctions, the Council adopted a decision prohibiting the maritime transport of Russian crude oil (as of 5 December 2022) and petroleum products (as of 5 February 2023) to third countries and the related provision of technical assistance, brokering services or financing or financial assistance. In applying the decision adopted in the eighth package of sanctions, on 3 December 2022, the Council decided to set an oil price cap for crude oil and petroleum oils and oils obtained from bituminous minerals, which originate in or are exported from Russia, at US$60/bbl. The level of the cap was established in close cooperation with the G7 ‘Price Cap Coalition’ (the EU, the US, the UK, Canada, Japan, and Australia), and applies from 5 December 2022. The mechanism’s functioning will be reviewed every two months, to respond to developments in the market, and will be set at least 5 % below the average market price for Russian oil and petroleum products. The decision introduced a 45 day transition period and allowed for further 90 day transition periods after every change in the price cap. The objectives of the price cap are: 1) to reduce Russia’s oil revenue (see above), even when it sells to other buyers (e.g. China) and 2) to avoid a widespread increase in global oil prices.
To implement the price cap, the parties attempt to use their dominance in particular services, i.e. US financial services, British shipping insurance, or Greek shipping services, which play a globally important role in oil deliveries. The implementation therefore takes place by establishing a buyers’ or service providers’ cartel and conditioning the purchase of Russian oil at below US$60/bbl.