EU tightens sanctions: Oil price cap for Russia at $50?

EU tightens sanctions: Oil price cap for Russia at $50?

The EU is planning a new 18th sanctions package against Russia with the aim of putting the country under financial pressure and punishing it for the war against Ukraine. President of the EU Commission, Ursula von der Leyen, presented the measures in Brussels and emphasized the urgency of reducing Russia's oil profits. A central component of the sanctions package is a reduction in the oil price cap from the current $60 per barrel to around $50, which corresponds to a decrease of around 15 percent compared to average market prices over the last ten weeks. This strategy aims to further weaken Russia's revenue from fossil fuels, which accounts for about 30 percent of the state budget.

Current figures show that Russia has already seen an 18 percent decline in fossil fuel revenue in the second quarter of 2025 compared to the previous year. This is despite an 8 percent increase in oil export volumes, marking the weakest quarter since the invasion began in February 2022. EU member states are intensively discussing the new sanctions package and Slovakia is currently blocking possible progress as it demands concessions on the EU plan to cut Russian gas.

Oil price caps and G-7 countries

The proposed new oil price cap could fall to $50 per barrel, which remains below the fiscal breakeven price, which is $77 per barrel for a balanced budget. This is a reduction from the previously estimated $92. In the coming negotiations, the G-7 countries will be called upon to discuss the proposal to lower the price cap from 60 to 45 US dollars per barrel. This price cap was originally introduced in December 2022 to limit Russia's oil revenues.

In addition, the sanctions package also addresses a ban on transactions with Russian banks and measures against the Nord Stream gas pipelines. Despite the existing restrictions, Russian oil exports have increased in recent weeks; Average deliveries were 3.36 million barrels per day in the four weeks ended June 8, up 40,000 barrels per day from the previous month. A Japanese refinery also recently started receiving Russian oil again, underscoring the complexity of international sanctions.

Market observations and challenges

OPEC+ announced a production increase of 548,000 barrels per day in August, which may also be aimed at efforts to stabilize global oil prices. Experts estimate the external breakeven price for Russia this year at $41 per barrel, while effective prices for Russian Urals crude have recently risen to an average of $53.80 per barrel. The current situation highlights the crucial role the energy industry plays in Russia's financial stability while the EU is on the path to sanctions. Given the precarious situation, the EU plans to adopt the new sanctions package before the summer break, but needs the consent of all 27 member states.

In summary, the EU is committed to taking the necessary steps to continue to put Russia under financial pressure and increase the burden of ongoing conflicts and geopolitical tensions, even if this may face resistance from individual Member States. Ultimately, pressure on Russia at this crucial political and economic period is essential to bring about changes in the country's actions.

Further information and details can be found in the following reports: FR and Telepolis.