The Group of Seven nations and the European Union member states have agreed to impose a cap of $100 per barrel on sales of Russian diesel to third countries as part of an effort to limit Moscow’s revenues.
The price cap mechanism is tied to an EU ban on seaborne imports of Russian refined fuels that kicks in Sunday. The G-7 said in a statement Friday that it and the EU agreed to a $100 a barrel level for petroleum products that trade at a premium to crude oil, including diesel. They also backed a cap of $45 for those that sell at a discount, such as fuel oil and some types of naphtha.
The coalition also agreed to delay a review of the $60 price cap for Russian crude oil until March. It will then begin regular two-month reviews of all the cap levels, according to people familiar with the discussions, who asked not to be identified. Setting the prices requires unanimous agreement among the EU, as well as signoff from the Group of Seven.
“The caps we have just set will now serve a critical role in our global coalition’s work to degrade Russia’s ability to prosecute its illegal war,” US Treasury Secretary Janet Yellen said in a separate statement.
During negotiations between the G-7 and EU, officials had expressed concerns that setting too low a level risks causing price spikes or supply glitches in Europe.
The cap on fuel prices includes a grace period until April for cargoes loaded before the cap was agreed, according to the people. The price cap measures will ban companies from providing shipping and services needed to transport the goods, such as insurance, unless the oils and fuels are purchased below the agreed price thresholds.
Benchmark diesel futures in northwest Europe have fallen in recent days, settling at $845.50 a ton, or $113 per barrel, on Thursday, though remain well above seasonal norms. But Russian diesel was priced at a significant discount earlier this week — about $90 — according to a calculation by Bloomberg based on data provided by Argus Media Ltd.
Price caps of $100 and $45 a barrel “would not severely impact Russian refiners,” consultancy Wood Mackenzie Ltd said earlier this week.
Still, the consultancy expects Russian crude runs to be about 800,000 barrels a day lower this quarter than the previous one, and that the country’s diesel exports will drop by about 200,000 a day, all driven by the EU import bans.