The embargo on seaborne Russian crude and the price cap on Russian petroleum products came into effect on February 5. The measures were imposed by the EU authorities and the G7 states.
Notably, the ban on Russian crude deliveries grants exemptions for some EU countries, for example, Bulgaria and Croatia. These countries are allowed to import a particular petroleum product, gas oil. The Czech Republic also secured its right to purchase Russian diesel fuel.
Before the restrictive measures were imposed, the EU countries had rushed to pump up their reserves with Russian petroleum products, first and foremost diesel fuel. Interestingly, Russian oil supplies accounted for almost 50% of world’s oil imports through the whole of 2022.
Commodity experts predict that Moscow will redirect its diesel fuel exports to the Middle East, Southern, and South Eastern Asia shortly. At the same time, Europe will strike deals with new suppliers in the US and the Middle East.
Previously, Russia exported to the EU a wide range of petroleum products, including diesel fuel, jet fuel, gas oil, fuel oil, and naphtha. Seaborne deliveries accounted for 90% of Russian oil imports to the European Union.
The embargo on crude oil originating or exporting from Russia has been already in force with a transitional period of 55 days. The sanctions on Russian oil include a price cap. Apart from the EU, the boycott was backed by the G7 countries. On top of that, the agreement prohibits shipments of Russian crude trading above the price cap to third countries.
The EU and its G-7 allies introduced two types of restrictions. One is a $100-per-barrel cap on products that trade at a premium to crude and the other is a $45 cap for petroleum products that trade at a discount to crude. The first group consists of more expensive and light oil products such as diesel fuel and kerosene. The second one includes cheaper heavy oil products such as fuel oil.
Russia retaliated with its countermeasures to mitigate the negative impact of the price caps. In late 2022, President Vladimir Putin signed an executive order banning shipments of Russian crude and petroleum products if the price cap is stipulated in a contract with a counterparty. The ban on crude oil came into force on February 1, 2023. A similar ban on exports of petroleum products is still under consideration by the government. The decree is valid until June 1, 2023.
