Europe sanctions Russia with oil price cap and banking limitations

The European Union has finally locked in its 18th sanctions package against Russia, and this one comes with some sharp edges. A major change is the shift to a lower, flexible price cap on Russian crude, a direct blow to one of Russia’s last consistent revenue streams.

The cap, which had previously sat still at $60 per barrel, will now float roughly $15 below global oil prices, meaning it’ll start around $45-$50, with automatic updates baked in at least twice a year. The move is meant to punch harder without tipping over the global energy market.

This wasn’t just a tweak. The original cap, agreed in December 2022, only let non-G7 buyers get transport, insurance, or reinsurance from G7 firms if they paid under the set price.

That system kept Russian oil flowing to countries like India and China, while attempting to bleed the Kremlin’s war funds. But with Russia continuing its war in Ukraine, the EU decided it was time to go further, even if it meant kicking over a few more chess pieces in the process.

EU lowers oil cap and targets Rosneft refinery

On Friday morning, EU diplomats agreed to this next round of pressure. Ursula von der Leyen, president of the EU Commission, called the package a strike “at the heart of Russia’s war machine,” listing banking, energy, and military-industrial sectors as the main targets. She also confirmed the oil cap would now be dynamic, giving Brussels room to squeeze harder every few months.

The EU’s foreign policy chief Kaja Kallas also confirmed the cap cut and highlighted something new: the bloc has now sanctioned Rosneft’s biggest refinery in India. That’s a new frontier, targeting assets connected to Russia but located overseas. It’s also the first time Brussels has reached that far into Asia to go after Russian infrastructure.

So far, no EU official has confirmed the exact bottom number of the cap. But Bloomberg sources say the mechanism is clear — peg the threshold $15 below market rates, with reviews done at least twice per year. If oil prices spike, so does the cap. If they drop, Russia’s ceiling drops too. Either way, the Kremlin’s margin shrinks.

The latest sanctions come with extra baggage too. Dozens more ships in Russia’s shadow tanker fleet just got blacklisted. That covert fleet, already more than 400 vessels deep, has been dodging sanctions, moving oil without triggering Western compliance rules.

Several entities and traders tied to that fleet are also now on the EU’s banned list. The bloc is also adding more goods to its export ban list, anything tied to weapons production or military use is now even harder for Russia to get.

EU eyes banking cuts, Nord Stream ban, and $2.8B in trade blocks

Alongside the energy crackdown, the EU is also going after Russia’s banking access. More than 20 banks are being considered for removal from SWIFT, the international payments system.

That would cripple their ability to move money globally and make it harder for Russia to fund anything abroad. The EU is also looking to ban Nord Stream gas pipelines, even though they were already shut down, officially blocking any future resumption.

Discussions are ongoing on additional bans, according to people familiar with the matter cited by Bloomberg. Nothing’s final yet, but the draft measures also include up to €2.5 billion ($2.84 billion) in fresh trade restrictions. The goal? Stop Russia from buying the technology it needs to build weapons. That includes electronics, components, and other dual-use items.

This package wasn’t easy to push through. It got delayed for weeks because Slovakia wasn’t on board. They wanted relief from the broader EU plan to cut off Russian fossil fuels. Their Prime Minister Robert Fico finally dropped the veto on Thursday, after the European Commission gave written guarantees to protect Slovakia’s energy interests.

Lastly, it’s worth noting the EU isn’t acting alone here. The G7 has also been watching this price cap debate. Canada, which holds the rotating G7 presidency in 2025, was contacted by CNBC but hasn’t confirmed whether it will support the new dynamic pricing model. If G7 partners follow through, the oil price cap becomes a lot harder for Russia to work around.

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