According to people familiar with the situation, the European Union (EU) is considering adding shipping limitations to its oil sanctions as the group continues to explore the implementation of a price ceiling on Russian crude oil. A shipping embargo would make it illegal for EU ships to transport Russian crude oil sold above a predetermined level. Greece is by far the world’s largest owner of oil tankers.
The EU’s current oil sanctions, approved in June, include an embargo on Russian seaborne oil; a ban on supplying services essential to transporting crude oil around the world, such as insurance, brokering, and finance; and exemptions for pipeline deliveries. This package is set to go into effect for crude shipped by sea in December and for refined petroleum products at the start of 2023.
Due to pressure from shipping states such as Greece and Cyprus, shipping was left out of the last package, which means that vessels that aren’t reliant on EU services might theoretically continue to transport Russian crude oil outside the EU. According to one of the people, including shipping would be necessary to avoid any potential loopholes and align the price restriction with the Group of Seven. Even after the EU put restrictions on Russian coal, Greek ships kept sending it to countries outside of the EU.
Following a drive from the US to keep global crude oil prices in check while also reducing Moscow’s income, G-7 ministers agreed to a cap on the price of Russian oil earlier this month. According to the sources, the EU would need to modify its previous sanctions to allow shipping and services to continue within an agreed-upon price cap.
To be implemented, those reforms would require the support of all 27 member states. Other G-7 countries, like the UK, which has a large insurance industry, would also do the same.
Several elements, including the price at which the allies would put the cap, are still to be worked out, according to the people. The previously enacted EU limits go into effect on December 5, but they may have an impact on physical crude oil trade far sooner due to the time it takes to rent vessels and transport cargoes to their destinations.
The EU’s 27 member countries spent weeks negotiating the terms of the existing sanctions in June. EU countries that gained exemptions for oil supplied through pipelines are likely to want to keep them, while those that import via sea may be concerned about an unequal playing field, according to one of the sources.
According to the source, shipping nations could also search for methods to defend their businesses. Hungary has also stated that it will not support any more energy sanctions.
It’s uncertain how successful a price-cap system would be, especially because some of Russia’s major consumers, including China and India, haven’t agreed to participate. US officials have said that the price cap could work even if many customers don’t join the coalition, because they could use the system as a bargaining chip in contract talks with Moscow to get lower prices.
Separately, EU states are talking about more punishments for Russia this week, such as more limits on exports of electronics and technology.
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