Brussels The EU countries have agreed to lower the price of Russian oil. This is intended to reduce Russia’s revenues. The price cap should not only have an effect in Europe, but worldwide.
The EU wants to achieve this by banning European shipowners from transporting Russian oil if it has been traded at a price above the cap. Insurance companies should also be prohibited from insuring other transports.
In principle, the G7 countries had already agreed on such a price cap at their summit meeting in early September. Greece, among others, had blocked. Many large oil tankers fly the Greek flag.
The new EU decision is a sanction in response to mock referendums in Ukrainian regions and the annexation of those regions Russia. President Vladimir Putin completed the annexation on Wednesday by signing the relevant laws.
Top jobs of the day
Find the best jobs now and
be notified by email.
Oil imports from Russia to the EU are due to largely end on December 5th. Imports by sea are then prohibited. Only pipeline oil is said to continue to flow to some Eastern European countries.
The participation of Great Britain is also decisive for the effect of the price cap. Around 90 percent of ships worldwide are insured in London. Recently, the British government hesitated to ban this business for Russian oil transports.
In addition, shipping companies could try to circumvent the sanctions by registering their ships in countries outside the EU or by pumping oil from one ship to another at sea. This is already practiced today in individual cases in order to disguise the origin of the oil.
The package of sanctions also includes further export bans on technological products, import bans on certain types of steel and a ban on EU citizens serving on the supervisory boards and executive boards of Russian state-owned companies. This means that ex-Chancellor Gerhard Schröder would no longer be allowed to accept such posts. Other people involved in organizing the sham referendums will be placed on the sanctions list.
Normally, it would be a matter of form for these decisions to actually come into force. However, Hungary announced the need for changes to the last major package of sanctions at the last minute and achieved a weakening. Also, no value has been set for the price cap.
Of the Leyen proposes new gas price cap
At the same time, the EU is working on various measures to lower the price of gas in the EU. “We must avoid a scenario in which the member states again outbid each other on the world markets and drive up prices for Europe,” said Commission President Ursula von der Leyen in the European Parliament. Instead, she wants to curb prices in joint negotiations with suppliers.
In addition, she intends to cap the price of gas for electricity generation and to make it clear that the EU is not prepared to pay any price for gas that is called for. How she intends to implement this was not made clear in her speech. It is not about a fixed import price, but about the prices in trade within Europe, said a spokesman. After all the details have been clarified, the Commission wants to send a letter to the EU heads of state and government. They meet in Prague on Friday and in Brussels on October 20th and 21st.
So far, the Commission had rejected such demands with the support of Germany. However, a letter from 15 states is putting pressure on the authorities. In it, France and Italy, among others, call for a cap on the price of gas imports.
That would mean that friendly countries like Norway or the USA would also be paid less. The prices charged for deliveries to Europe are currently higher than what is achieved in Asia, for example. One reason for this is the lack of capacity in European LNG terminals. A price cap would be below the European market price but above the Asian market price.
Economists generally warn against artificially lowering prices. Because that inevitably reduces the incentive to reduce gas consumption and thus increases the risk of shortages. Corresponding plans were therefore rejected in March of this year.
“Since then, the situation has developed significantly,” says von der Leyen. “Compared to March, more Member States are open to it today and we are better prepared.” A correct design of the upper limit can ensure security of supply.