Introduction to Oil Price Limit
The European Union and Great Britain are pushing to reduce the oil price limit, an important economic sanction against Russia. The price limit is currently $60 (€52.7) per barrel of oil and has existed since December 2022. This limit means that shipping and insurance services from the G7 group of advanced economies and EU nations will not be available for the transit of Russian oil unless the oil is sold at or below the specified level.
Current Efforts to Reduce the Price Limit
The EU is currently working on an 18th sanction package against Russia after releasing its 17th package at the beginning of this week. The President of the European Commission, has confirmed that the EU and Great Britain are convincing its G7 partners to lower the oil price limit for the next package. Discussions about the price upper limit with G7 partners have not yet been completed, and any reduction in the upper limit would require unanimous approval from EU member states.
Impact of the Price Limit on Russian Oil
Brent Crude, a global benchmark, has recently been trading at almost $65 per barrel, while Russian oil has been trading between $55 and $59 in April and May, just below the upper limit. The idea behind lowering the upper limit is to reduce the amount of money Moscow earns from selling oil through legitimate trade. The oil price fell greatly in 2025, and Brent Crude is now only a few dollars above the price limit of $60.
Hesitation from the US
The G7 Minister of Finance met last week in Canada, where there were discussions about reducing the cap. They published a statement condemning Russia’s "continued brutal war" and said that if efforts to achieve a ceasefire fail, they would "increase further sanctions." However, the US is reportedly not convinced about reducing the price limit, citing falling oil prices as already harmful.
The Shadow Fleet and Sanctions
An important focus of the latest sanction packages was on dealing with Russia’s so-called shadow fleet of hundreds of aging tankers bought to escape the price limit. The ships are usually bought through third parties and then transport oil around the world using illegitimate insurance systems. The EU and the United Kingdom have begun to sanction individual tankers, but the US has not sanctioned any since Donald Trump returned as US President.
Enforcement of the Price Limit
Experts agree that the biggest problem with the price limit is not the price itself, but the enforcement. The current enforcement measures are not robust, and measures to check compliance are "very relaxed." There have been extensive "certificate certificate fraud" cases, where tankers claim to be selling oil in accordance with the upper limit when it is actually being sold above the tariff.
The Russian Economy and Oil Prices
The Russian economy is currently particularly susceptible to changes in oil prices. The falling oil price, which is a major change compared to the strong prices that prevailed in 2023 and for a large part of 2024, has a clear chance of seriously denting Russia’s economy. Reducing the price limit and restricting the export of Russian oil could bring Russia’s energy revenue to a critically painful level.
Conclusion
In conclusion, reducing the oil price limit is a crucial step in limiting Russia’s ability to finance its war in Ukraine. However, the enforcement of the price limit is just as important as the price itself. The sanction coalition must take more resolute steps, including measures that would restrict the supply of Russian oil, to bring Russia’s energy revenue to a critically painful level.
