Russia's proposal to freeze the oil price ceiling is part of the European Union (EU)'s 21st package of sanctions against Russia related to the Ukraine conflict, expected to be discussed in early June, many sources revealed on May 31.
Under the current price ceiling mechanism, Western entities are prohibited from trading Russian oil at prices higher than the prescribed threshold, which is automatically set every 6 months at a rate 15% lower than the market average price for Russian Urals crude oil.
The current ceiling price is 44.10 USD/barrel, while the market price of Urals oil fluctuates around 86 USD/barrel. This oil price is significantly lower than 120 USD/barrel recorded at the peak of the Iranian crisis.
The oil price increase means that when the ceiling price is reviewed in July, it is likely to increase to at least $65, higher than the initial $60 threshold set by the G7 in 2022, the source noted.
Other options that the EU is considering in this round of sanctions against Russia include suspending automatic price increases until the end of the year or returning to the ceiling price of 60 USD.
Russia has rejected the ceiling price on its oil and has banned the transportation of Russian oil to countries that comply with this price. Russia has redirected most of the energy it previously exported to Europe to countries such as China and India.
In the 21st sanctions package, the EU is also discussing other measures, including targeting many banks, oil businesses, oil refineries and cryptocurrency operators in third countries that Russia uses to evade the bloc's sanctions.
In addition, about 20 additional oil tankers will be sanctioned in the shadow fleet that Russia uses to transport oil. Finally, the EU's sanctions will be extended to liquefied natural gas (LNG) tankers.
According to sources, so far, the EU has sanctioned hundreds of ships and intends to target ships providing services to oil tankers.
However, new sanctions are unlikely to include a complete ban on maritime services. Some EU member states continue to oppose this option due to instability in the Middle East.
The main goal of the new sanctions package, according to sources, is to further tighten Russia's energy and financial sectors, as well as impact the country's military industry by cutting essential supplies.
Other proposals for the next package of sanctions include trade restrictions on some important minerals, metals and ore used in Russia's aerospace industry and to develop unmanned aerial vehicles and technologies such as signal interference.
The EU is also in the early stages of assessing support measures for the Euroclear clearing company after the Moscow court's ruling allowing the Central Bank of Russia to have the ability to confiscate the company's assets. This development occurred after the EU approved the use of emergency powers to indefinitely extend the freeze of up to 210 billion euros of assets of the Central Bank of Russia. Most of this money is held through Euroclear.
