On Friday, the European Union approved its 18th sanctions package against Russia in response to the ongoing war in Ukraine, introducing additional measures designed to inflict further damage on Russia’s oil and energy sectors.
According to EU diplomats, the European Union will implement a dynamic price cap on Russian crude, set at 15% below its average market value, aiming to replace the largely ineffective $60 cap that the Group of Seven major economies have attempted to enforce since December 2022.
“The EU just approved one of its strongest sanctions packages against Russia to date,” EU foreign policy chief Kaja Kallas said on X.
“We will keep raising the costs, so stopping the aggression becomes the only path forward for Moscow.”
G7 Price Cap Ineffective So Far
However, Russia has largely continued to sell most of its oil—the cornerstone of its state revenue—above the previous price cap, partly because the current system lacks clarity on who is responsible for enforcing it. As a result, traders remain skeptical that the new EU sanctions will substantially hinder Russian oil exports.
Kremlin spokesperson Dmitry Peskov dismissed the EU’s latest action, which seeks to cap Russian crude at approximately $47.60 per barrel based on current prices. Meanwhile, benchmark Brent crude futures edged up slightly on Friday, hovering around $70. O/R
“We have repeatedly said that we consider such unilateral restrictions illegal, we oppose them,” Peskov told reporters.
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“But at the same time, of course, we have already acquired a certain immunity from sanctions, we have adapted to life under sanctions.”
The package also prohibits transactions involving Russia’s Nord Stream gas pipelines beneath the Baltic Sea, as well as dealings with Russia’s financial sector.
Kallas stated that 105 vessels in Russia’s so-called "shadow fleet"—a term used by Western officials to describe ships Moscow employs to bypass oil sanctions—have been blacklisted, along with unnamed Chinese banks accused of facilitating sanctions evasion.
Ukrainian President Volodymyr Zelenskiy described the decision as “essential and timely,” amid Russia’s escalating air attacks on cities and villages across Ukraine.
Foreign Minister Andrii Sybiha added: “Depriving Russia of its oil revenues is critical for putting an end to its aggression.”
US Declines to Back Europe on Price Cap
For the past two months, the European Union and Britain have been advocating to reduce the G7 oil price cap, as a drop in oil futures has rendered the $60-per-barrel threshold largely ineffective. O/R
However, the United States has opposed the move, prompting the EU to proceed independently—though analysts and oil traders warn it will have limited enforcement power.
Since the dollar dominates global oil transactions and U.S. financial institutions are central to processing payments, the EU cannot effectively block trades by restricting access to dollar clearing.
The new EU sanctions package was delayed for weeks as Slovakian Prime Minister Robert Fico sought concessions related to a separate plan aimed at phasing out the EU’s reliance on Russian oil and gas.
On Thursday night, Fico declared he was withdrawing his opposition.
Countries like Greece, Cyprus, and Malta had voiced concerns about how the oil price cap might impact their shipping industries. However, Malta—the final holdout among them—also agreed on Thursday.
“But at the same time, of course, we have already acquired a certain immunity from sanctions, we have adapted to life under sanctions.”
