European Union ‘Ready’ to Enforce Russian Oil Price Cap, Says Commission President

European Commission President Ursula von der Leyen gives a press conference on energy at EU headquarters in Brussels on Sept. 7, 2022. (Kenzo Tribouillard/AFP via Getty Images)

The European Union is “ready to go” with its efforts to impose a price cap on Russian oil exports, according to Ursula von der Leyen, the president of the European Commission.

“We have set all the tools necessary in place in the European Union,” von der Leyen said in an interview with Bloomberg. “It is important not only to dry out the war chest of Russia but also very important for many vulnerable countries to have an acceptable level of prices.”

However, the price cap is yet to be decided, she added.

In October, the EU agreed to impose a cap on the prices of Russian oil as part of its eighth package of sanctions against Moscow for invading Ukraine. Once the price cap is implemented, European entities will only transport Russian oil if the prices are below a fixed level.

The price cap is expected to come into effect after Dec. 5 for oil and Feb. 5 for refined petroleum products. On Oct. 31, the U.S. Treasury also issued new guidelines for Russian oil price caps.

Western allies plan on enforcing the cap by denying services like navigation, brokering, finance, and insurance for Russian oil shipments that are priced above the predetermined level. Representatives from the Group of 7, the EU, and Australia are negotiating the exact level of the price cap.

A senior official from the Treasury Department informed reporters that discussions on price caps will be based on the historical oil prices from Russia as well as the country’s oil production costs.

EU Energy Imports

The EU has succeeded in bringing down its imports of Russian energy supplies despite rising overall imports.

Crude and condensate arrivals to Europe, excluding Turkey, hit 8.46 million barrels per day in September, which is the highest monthly volume since January 2020, Bloomberg reported.

The share of Russia in imports fell to 21 percent for the month, which is down from the 2021 average of 34 percent. In addition, Europe’s imports of non-Russian crude barrels rose to the highest level since 2016.

Data from the European Commission showed Russia accounted for just 14 percent of gas imports in September, down from 45 percent in 2021.

Non-Russian liquefied natural gas imports grew by 19 billion cubic meters (bcm) in the first half of 2022 when compared to the same period last year. Non-Russian pipeline gas imports grew by 14 bcm, which came from places like North Africa, the United Kingdom, Norway, and Azerbaijan.