Europe Reaches Deal For Price Cap On Russian Diesel

BRUSSELS (AP) — European Union governments tentatively agreed Friday to set a $100-per-barrel price cap on sales of Russian diesel to coincide with an EU embargo on the fuel — steps aimed at ending the bloc’s energy dependence on Russia and limiting the money Moscow makes to fund its war in Ukraine.

The information was provided by diplomats from 3 different EU member nations ahead of a formal announcement by the Group of Seven major industrialized nations. They spoke on condition of anonymity because the official announcement would come later.

The $100-per-barrel cap applies to Russian diesel and other fuels that sell for more than the crude oil used to make them. Officials agreed on a $45-per-barrel limit on Russian oil products that sell for less than the price of crude.

Russia has said it will not sell to countries obeying the oil cap, but because its oil is selling for less than $60 per barrel, it has kept flowing to the global market. The price caps encourage non-Western customers that have not banned Russian oil to press for discounts, while outright evasion—though possible—carries additional costs such as organizing off-the-books tankers.

The ambassadors of the 27 EU nations put forward the decision, and national governments have until early Saturday to react with a written objection. No changes to the deal were expected.

Europe has been steadily reducing its diesel supplies from Russia from around half of all imports. Diesel is key to the economy because it is used to power cars, trucks carrying goods, farm equipment and factory machinery. Prices have spiked since Russia invaded Ukraine on rebounding demand and limited refinery capacity in some places.

If the price cap works as intended and Russian diesel keeps flowing, fuel prices should not skyrocket, analysts say. Europe could get alternate supplies of diesel from the US, India and the Middle East, while Russia could seek new customers outside Europe.

However, the impact of the cap will be unpredictable as shippers reroute flows of the fuel to new destinations, and longer sea journeys could strain tanker capacity.

Fossil fuel sales are a key pillar of Russia’s budget, but European governments previously hesitated to cut off their purchases because the economy was heavily dependent on Russian natural gas, oil and diesel. Since the start of the war in Ukraine, that has changed.

McHugh reported from Frankfurt, Germany.

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