BRUSSELS — The EU will propose freezing the adjustment mechanism in its oil price cap on Russian crude to prevent it from rising with global benchmarks, European Commission President Ursula von der Leyen said on Tuesday.
That would stop Russia from benefiting from the rise in oil prices resulting from Iran’s closure of the Strait of Hormuz.
Presenting the EU’s 21st package of sanctions on Russia, Von der Leyen explained that “our oil price cap has a built-in adjustment mechanism to follow the market. It was not made for market shocks like the one caused by the closure of the Strait of Hormuz.”
The price cap was last reduced in January, to $44.10. With oil prices rising steadily after the U.S. and Israel attacked Iran and that country blocked the Strait of Hormuz, the automatic adjustment mechanism would see the price cap actually increase from July.
“We propose to simply pause the adjustment until January next year,” said von der Leyen, who has started to give presentations for new sanctions packages since last year. “This will give oil markets time to stabilize while preserving pressure on Russia’s revenues.”
The proposed sanctions still need to go through negotiations with EU capitals. The 27 countries need to agree unanimously on any sanctions packages.
The EU will also propose to sanction dozens of new ships Russia uses to export oil and gas and it will prohibit the sale of gas tankers to Russia, as it already has done for oil tankers. Von der Leyen did not mention Russian oil companies Rosneft and Lukoil, which were suddenly sanctioned by the U.S. last year. Before the presentation, the EU was widely expected to have some measures against the companies, the latter of which has a sizable retail footprint in the EU.
Von der Leyen also proposed imposing sanctions on Russian fisheries for the first time.