The EU tentatively agrees to a $60 price cap for Russian oil

December 02, 2020

There was tentative agreement on Thursday between governments of the European Union on a $60 a barrel cap on Russian seaborne oil - an idea that was put forward by the Group of Seven (G7) nations.

In order to safeguard global oil supply, the G7 will cap the price of Russian seaborne crude oil starting Dec. 5 and replace the stricter EU ban. Russia produces 10% of the world's oil.

Shippers, insurance companies and reinsurance firms will be prohibited from handling Russian crude exports around the globe unless they sell it below the G7 cap.

Moscow would have difficulty selling its oil for a higher price because most shipping and insurance companies are based in G7 countries.

As a result of the price cap, Russia would be unable to fight its war against Ukraine with the resources they currently have.

The document that Reuters obtained shows that a review of the oil price cap will take place mid-January, and then every two months after that, in order to assess how the scheme is working, and to respond to any "turbulences" that may occur in the market as a result.

Ships carrying crude oil of Russian origin loaded before Dec. 5 and unloaded by Jan. 19, 2023 would be subject to a 45-day transition period.