FRANKFURT, Germany (AP) – Europe on Sunday imposed a ban on Russian diesel fuel and other refined petroleum products, reducing its energy dependence on Moscow and further squeezing the Kremlin’s fossil fuel revenues as punishment for its invasion of Ukraine.Â
The ban is accompanied by a price cap agreed by the Group of Seven United Democracies. The goal is to keep Russian diesel flowing to countries like China and India, avoiding sudden price spikes that would hit consumers around the world, while cutting Moscow’s budget and its war-funding profits.
Diesel is vital to the economy as it powers cars, trucks, farm equipment and factory machinery. Diesel prices are rising due to recovery in demand from the COVID-19 pandemic and restrictions on refining capacity, contributing to inflation in other commodities around the world.
The new sanctions create uncertainty about prices as the 27-nation European Union finds new supplies of diesel from the U.S., Middle East and India to replace those from Russia, which at one point delivered 10% of Europe’s total diesel needs. Those are longer journeys than from Russia’s ports, stretching available tankers.
The price cap of $100 per barrel for diesel, jet fuel and gasoline is to be enforced by barring insurance and shipping services from handling diesel priced over the limit. Most of these companies are located in Western countries.
It follows the $60 per barrel cap on Russian crude that took effect in December and is set to work in the same way. Both the diesel and oil caps can be tightened afterwards.
Thomas O’Donnell said, “If we set a price cap, it will keep Russia’s prices down without causing price spikes that will hurt Western economies and developing nations. Deny it and end [President Vladimir] Putin’s war.” You can deny the money,” he said. Global Fellow of the Wilson Center in Washington.
The diesel price cap is set roughly at how much Russian diesel is traded at, so it won’t take effect immediately. The main problems in Russia today are finding new customers and the inability to avoid price ceilings. However, the cap is intended to prevent Russia from gaining from sudden price spikes in refined oil products.
Analysts say prices may surge initially as the market settles for changes. But if the cap works as intended and Russian diesel continues to flow to other countries, the embargo shouldn’t cause prices to skyrocket, they say.
Diesel fuel at the pump he has been empty since early December and costs €1.80 per liter ($7.37 per gallon) as of January. According to the weekly oil market report published by the European Union Council, 30. Pump prices in Germany, the EU’s largest economy, fell 2.6 cents to €1.83 per liter ($7.48 per gallon) as of January 31.
The ban gives him a 55-day grace period for diesel loaded on tankers by Sunday. European Union officials say importers have had time to adjust since the ban was announced in June. Russia made more than $2 billion from diesel sales to Europe in December alone as importers appear to be hoarding additional purchases ahead of the ban.
Europe has already banned Russian coal and most of its crude oil, while Moscow has cut off most natural gas supplies.
