EU sees more work ahead to implement Russian oil price cap

By Gabriela Baczynska

BRUSSELS (Reuters) -The European Union on Thursday gave a final approval to its eighth batch of sanctions against Russia for its invasion of Ukraine, but said implementing a price cap on Russian seaborne oil included in the package required more work.

The sanctions will block 7 billion euros ($6.9 billion) worth of Russian exports to the 27-member bloc, including steel and soap, EU officials said.

They will also stop more exports from the EU, including cameras and processors, as well as blacklisting 37 more individuals and entities, including those involved in organising what the West denounced as Moscow’s “sham” annexation votes.

The price cap on Russian seaborne oil deliveries to third countries would align the bloc with the United States and the G7 group of the world’s most industrialised countries, which last month agreed in principle to go ahead with such a move.

“The implementation of the oil price cap is still being discussed, we need to be sure it actually works, there must be checks for operators to show the price was actually below the cap – all of that is not easy,” said one EU official.

It should be adaptable, below the market but at a level at which Russia would still want to sell, the official added.

That means the EU’s decision is more of a first step towards an oil cap, rather than actually implementing it.

The EU official, who spoke on condition of anonymity, said there was “some time pressure” to figure out the detail or else previously agreed oil restrictions take effect from December, and for petroleum products from February.

Most notably, any G7 deal on the exact pricing mechanism would still need a unanimous agreement by all the 27 EU countries.

The cap would cover insurance, financing and transport of seaborne Russian crude to third countries, altering an EU decision last June on a blanket ban of the first two only.

While the Eurasia consultancy said that amounted to a watering down of previously agreed sanctions, EU diplomats and officials said the new approach would have broader consequences, while mitigating risks for the global industry.

Oil producing countries grouped in OPEC+, which includes Saudi Arabia and Russia, agreed production cuts on Wednesday and Moscow said it may cut output to offset any negative effects from Western price caps.

Pilot services would be exempted from the EU cap to avoid accidents, said EU officials.

The bloc also wants safeguards for seafaring nations like Greece, Cyprus and Malta against so-called reflagging that would see business they lose moving to global competitors like Panama.

“The maritime nations are directly concerned and need a global level playing field preserved,” said the EU official.

New restrictions on trade in goods with Russia mean a third of the bloc’s exports to and nearly 60% of imports from Russia would be cut compared to exchange levels prior to Moscow’s invasion of Ukraine on Feb.24, said EU officials.

The sanctions would also bar Europeans from sitting on boards of Russian state-owned companies, sever all ties in cryptocurrency trading and make circumventing sanctions the basis for being blacklisted by the EU, among others.

Still, the steps fall short of some expectations, as they do not put an end to EU imports of Russian diamonds or cooperation in the field of nuclear energy, among others.

($1 = 1.0197 euros)

(Reporting by Gabriela Baczynska; Editing by Alexander Smith)