US, Allies Impose Price Cap on Refined Oil Products from Russia to Limit War Financing
By The United States and its allies have imposed a price cap on refined oil products from Russia in an effort to limit the country’s revenue and restrict its ability to finance its war in Ukraine. The US Department of Treasury said the price cap will be US $100 per barrel for ‘premium-to-crude’ products such as diesel, kerosene and gasoline, and US $45 for ‘discount-to-crude’ products such as fuel oil.
The EU and the G7 countries, including the US and Japan, agreed on the cap in December 2021, alongside a ban on seaborne crude from Russia. The ban, which went into effect on December 5th, 2022, barred Western firms from handling cargoes of Russian oil priced above the $60 cap.[0]
The EU ban on Russian seaborne crude oil products imports, including diesel and naphtha, is scheduled to go into effect on February 5th.[1] It will replace around 1 million barrels per day (bpd) of Russian fuel imports, including 600,000 bpd-650,000 bpd of diesel.[2] Prior to the war, Russia was responsible for supplying over half of the diesel imports the EU received, accounting for roughly 10% of the total diesel consumption.[3]
The EU is looking to set the cap at $100 per barrel on premium oil products such as diesel and $45 per barrel on products like fuel oil. The purpose of the price caps is to limit the amount of money Russia makes from its crude oil and refined products, while still ensuring there is a sufficient supply of Russian energy in the market.
The US and allies are trying to limit Russia’s ability to make money and finance its war efforts with new price limits on petroleum products. The official stated to reporters on Friday that their intention was not to cause the collapse of the Russian economy.[4] We seek to make it impossible for the Kremlin to both support the economy and finance their war.[5]
The senior Treasury official said that economically, the country “doesn’t function any longer like a normal economy.” “They’ve shut it down largely, meaning that if you have money of Russia, they’ll let you keep putting money in Russia, but you can’t take money out. They no longer allow foreign capital coming into Russia,” the official said.[4]
0. “Is EU ready for life without Russian diesel?” DW (English), 4 Feb. 2023, https://www.dw.com/en/is-eu-ready-for-life-without-russian-diesel/a-64600376
1. “Here's why Europe's new Russian fuel sanctions won't cripple Moscow” Business Insider Africa, 4 Feb. 2023, https://africa.businessinsider.com/markets/heres-why-europes-new-russian-fuel-sanctions-wont-cripple-moscow/w00j4k0
2. “Russia Sees No Reason To Cut Its Oil Product Output” OilPrice.com, 3 Feb. 2023, https://oilprice.com/Latest-Energy-News/World-News/Russia-Sees-No-Reason-To-Cut-Its-Oil-Product-Output.html
3. “EU reaches agreement on Russian oil products price cap” POLITICO Europe, 3 Feb. 2023, https://www.politico.eu/article/eu-reaches-agreement-on-russian-oil-products-price-cap/
4. “US, EU, G7 and Australia announce new price cap on Russian petroleum products” WENY-TV, 3 Feb. 2023, https://www.weny.com/story/48309769/us-eu-g7-and-australia-announce-new-price-cap-on-russian-petroleum-products
5. “US, EU, G7 and Australia announce new price cap on Russian petroleum products” CNN, 3 Feb. 2023, https://www.cnn.com/2023/02/03/politics/price-caps-russian-petroleum-products/index.html
