The European Union is considering the possibility of temporarily freezing the price cap on Russian oil in response to the escalation of military conflict in the Middle East. Such measures are being discussed due to the impact of the war between the US, Israel, and Iran, which has led to a sharp increase in energy prices and the effective closure of the Strait of Hormuz.
This is reported by Finway
Dynamic price cap mechanism and its review
Last year, the EU introduced a dynamic system for setting the upper price limit on Urals-grade Russian oil, which involves automatic updates every six months at a level 15% below the average market price. Currently, the price cap stands at $44.10 per barrel. However, due to global events, the next review in July may significantly raise this threshold — it is expected to increase to at least $65 per barrel, surpassing the previous limit of $60 agreed upon by G7 countries.
According to current regulations, European companies are prohibited from providing insurance and transportation services for oil sold above the established limit.
Possible scenarios and EU response
According to informed sources, the main option involves maintaining the current price cap level without further automatic increases — a so-called “freeze” of the mechanism. Alternative options are also being considered: suspending the dynamic price update until the end of the year due to the extraordinary situation in the Middle East or limiting the price cap increase to $60 per barrel — a level previously approved by G7 members.
“The European Union is considering a temporary ‘freeze’ on the price cap for Russian oil due to the war in Iran.”
In May, European politicians sharply criticized the US decision to extend exemptions from sanctions regarding the export of Russian oil, emphasizing that such a move could increase Moscow’s revenues amid the ongoing conflict in Iran.