The European Council officially approved the decision to impose the price cap on Russian oil products, shipped by sea, at $100 for diesel fuel and $45 for products that trade at a discount, press offices of the European Council and the European Commission announced Saturday. The price cap will be valid for Western businesses and logistical companies and territories under Western control, with a transitional period that will start on February 5 and will last for 55 days.
The first price cap for petroleum products traded at a discount to crude oil is set at USD 45 per barrel, while the second price cap for petroleum products traded at a premium to crude is set at USD 100 per barrel,” the European Council said in its statement.
“The level of the cap was established in close cooperation with the Price Cap Coalition and will become applicable as of 5 February 2023. A transitional period of 55 days is foreseen for those vessels carrying Russian petroleum products, which were purchased and loaded onto the vessel prior to 5 February 2023 and unloaded prior to 1 April 2023,” the statement reads.
The cap level will be reviewed once every two months.
Attempts to implement price caps for Russian crude oil (at $60 per barrel, imposed on December 5) on the global market are being made by the US, Canada, the EU, the UK and Japan. In practice, these countries prohibit their own and foreign logistical companies from transporting Russian oil and oil products, if they are being shipped at prices above the price cap. Financial companies are also prohibited from providing insurance to such shipments.
Notably, the EU imposes complete ban on import of Russian oil products by sea starting on February 5, which makes the price cap an attempt to influence the global market specifically.
For now, all price caps are set at levels that are close to real market prices.