A price cap set by the Group of Seven (G7) as well as an outright ban by the European Union on Russian seaborne oil came into effect on Monday as the two blocs try to reduce the Kremlin’s ability to continue financing the war in Ukraine.
On Friday, the G7, EU and Australia agreed to set a limit on the price of Russian oil at $60 per barrel. Back in May, the EU announced a ban on Russian seaborne crude oil. The 27-member bloc also said a ban on imports of refined petroleum products will be enforced from February 5.
The ban covers more than two-thirds of Russian oil imports coming into the EU, according to European Council President Charles Michel. He referred to this ban as a symbol of EU unity and said in a tweet that it puts “maximum pressure on Russia to end the war”.
While the EU’s oil embargo also applies to EU operators that insure and finance ships carrying Russian crude oil around the world, it does not apply to Russian oil imports coming into the bloc through pipelines.
The Druzhba oil pipeline, which began operating in 1964, has been supplying Russian oil to many Central and Eastern European countries, including Germany, Poland, Hungary, Slovakia, the Czech Republic and Austria.
Germany, Poland and Austria have supported the ban, pledging to completely wean off Russian oil imports by the end of this year.
But Hungary, the Czech Republic, Slovakia and Bulgaria are still heavily dependent on Russian pipeline oil and will be allowed to continue imports temporarily until they develop alternative supplies. However, these pipeline imports cannot be resold to other EU nations or non-EU countries, according to the European Commission.
Here are five things to know about the effects of the EU oil import ban and price cap:
What does the ban and price cap mean for the oil market in the EU?
Before Russia’s war in Ukraine, the 27-member bloc was heavily dependent on Russian oil exports. In 2021, the EU imported $74.8 billion of crude oil and refined oil products from Russia.
These imports of Russian crude oil amounted to 2.2 million barrels per day, including 700,000 barrels per day via pipelines as well as 1.2 million of refined oil products, according to the International Energy Agency (IEA).
With the EU embargoes on Russian sea-borne crude oil coming into force on Monday and on refined oil products in February, the IEA also said the bloc will need to replace 1 million barrels of crude…