The European Union has to coordinate its plans to impose a full ban on maritime services for Russian crude oil with the G7 group of the world’s most advanced economies, David O’Sullivan, the EU Sanctions Envoy, said on Thursday.
Early this month, the European Commission proposed in its planned 20th package of sanctions against Russia a full maritime services ban for Russian crude oil, which is expected to “slash further Russia’s energy revenues and make it more difficult to find buyers for its oil,” European Commission President Ursula von der Leyen said.
“As shipping is a global business, we propose to enact this full ban in coordination with like-minded partners after a decision of the G7,” von der Leyen added.
The EU will need to coordinate this plan with representatives of the G7 group, sanctions envoy O’Sullivan said at a news conference in Kyrgyzstan, as carried by Reuters.
EU and G7 representatives will discuss the issue over the coming weeks, the EU diplomat said.
“I think the European Union has made clear that for the moment we are applying the oil price cap, which has just recently been reduced to $44 a barrel,” O’Sullivan added.
“Russia’s revenue from oil and gas is down dramatically in recent months, and we will continue that policy.”
The EU started applying in January a new automatic and dynamic mechanism for price adaptation of the oil price cap for Russian crude, which lowers the cap to $44.10 per barrel effective February 1. The new mechanism ensures that the cap is always 15% lower than the average market price for Russia’s flagship Urals crude in the previous reference period of 22 weeks.
Under this current price cap mechanism, Western firms are only allowed to provide maritime transport and related services for Russian crude oil if it is sold at or below the price cap.
A full EU ban on maritime services would make the price cap irrelevant. The mechanism has been applied with mixed success as Russia moved large volumes of its oil exports to the shadow fleet and web of traders.
By Michael Kern for Oilprice.com
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