Four EU diplomats say that the European Commission will likely propose a floating Russian crude oil price cap as part of a draft new sanctions package this week in an effort to overcome the opposition of some member states.

In its 18th package of sanction against Russia, the Commission proposed to lower the price cap for Group of Seven (G7) countries from $60 per barrel to $45 per barrel. The G7 price limit, which was intended to curb Russia's financial ability to fund the war in Ukraine in December 2022, was initially agreed.

A fall in oil prices globally prompted the plan to lower price caps. The current cap is now largely irrelevant.

The G7 Leaders' Meeting in Canada, held in June, did not see the U.S. president Donald Trump support a lower cap.

The oil price briefly soared to $80 per barrel during the 12-day conflict between Israel and Iran, in June. It then fell back down into the $60s.

Now, the EU is moving forward on its own.

Four EU sources confirmed that the Commission is drafting a mechanism to adjust the cap on Russia crude based upon changes in the global oil prices.

The European Commission refused to comment.

One source said that the cap is still being reviewed and will be adjusted to the global crude oil price.

One source said that it was unclear what the cap would actually be. However, the starting point for the program would be slightly more than $45

Greece, Cyprus and Malta are among the maritime nations that have been concerned about the price cap for a long time. They fear the loss of business it could cause to their shipping industries and the possibility that shipowners may move their operations outside the EU.

The cap prohibits the trade of Russian crude oil transported on tankers at a price above $60 per barrel. It also prevents shipping, insurance, and reinsurance companies from handling cargoes containing Russian crude throughout the world, unless they are sold below the cap.

Sources said that during the G7 meeting of finance ministers in the Canadian Rockies, in May, U.S. Treasury Sec. Scott Bessent remained sceptical about the need to lower this cap.

Trump has stepped up his rhetoric against Russian President Vladimir Putin, and has hinted that he might push for new U.S. Sanctions.

Some U.S. senators may support the idea of a price cap. Lindsay Graham may support the idea.

Slovakia will not block the package of sanctions, even if the EU ambassadors are able to reach an agreement on the revised mechanism for price caps. This is because it has concerns about the EU's plan to stop Russian energy imports before 2027. EU sanctions must be approved by unanimity.

(source: Reuters)