March developments
Elizabeth Rosenberg, the Under Secretary of the Treasury for Terrorism Financing and Financial Crimes, spoke at the CERAWeek energy conference in Houston. She indicated that the G7 economies were considering a reexamination of the price ceiling on Russian oil for March, inviting questions about how any adjustment could influence Russia’s stance on Ukraine. Rosenberg declined to speculate on whether shifts in marginal oil costs would alter Moscow’s position or whether there was an imbalance in supply and demand in the oil market following the price cap. (Source: Reuters)
Earlier, US Energy Representative Amos Hochstein affirmed that the price ceilings imposed by the G7 and its allies are functioning well. He emphasized the mechanism’s effectiveness in ensuring Russian crude and refined products are traded at prices below marginal cost, a point cited by Reuters during the CERAWeek conference. Hochstein also noted Russia’s announcement of a daily production cut of 500,000 barrels, roughly 5% of output, and described the move as having limited impact on the actual cost of Russian oil. He questioned the motivation behind Moscow’s production reduction and argued that prices were not exceptionally high, stressing the aim of keeping Russian barrels on the market at a discount. (Source: Reuters)
March adjustments to the price cap
On December 5 of the previous year, the cap on Russian oil prices took effect. It was set at $60 per barrel with the G7, the European Union, and Australia backing the measure, while Poland proposed a $30 threshold. The framework envisions bi-monthly reviews of the cap. (Context: EU policy notes)
During a March 6 interview with Bloomberg, Estonian Foreign Minister Urmas Reinsalu urged the European Union to reduce the marginal price of Russian oil to $30 per barrel. He argued that halving the cap would press Moscow to limit its war financing and suggested that this would be a prudent direction. He also stressed that EU nations must address sanctions circumvention that could enable access to technology used in military production. (Source: Bloomberg)
Reinsalu highlighted that the EU aims to maintain a price not far from 95% of average market values, while noting that decisions to alter the limit rest with the G7 and require consensus among EU member states. He warned that delaying reductions could shield Russia from necessary market signals, yet a move away from the current cap seemed unlikely without broad approval. The Bloomberg report also noted that Russia’s banking and insurance systems were still able to operate within the SWIFT network, and suggested extending the price cap to natural gas. (Source: Bloomberg)
“This is a matter for agreement, but the goal remains to limit Russia’s sanction evasion,” Reinsalu stated. He charged that Russia sources European-made semiconductors for missiles and heavy armor through intermediaries in Turkey, the United Arab Emirates, and Kazakhstan, underscoring broader efforts to curb war financing. (Context: Estonian Foreign Ministry remarks)
Reinsalu also indicated that Estonia seeks to set a precedent by freezing assets of sanctioned Russian entities and using recovered funds for Ukraine’s reconstruction. He announced that Estonia had frozen roughly 20 million euros from private Russian companies. (Context: Estonia’s stance)
Sanctions and market signals
In late February, Bloomberg reported that Russia managed to break the price ceiling and traded oil above the cap in the market’s early weeks, with prices averaging around $74 per barrel. The report challenged the view that price caps alone curtailed Moscow’s war financing, noting that data from the Institute of International Finance and researchers at Columbia University and the University of California suggested the price remained well above the threshold. Western governments expressed concern about such figures, arguing that the caps were designed to constrain Kremlin access to petrodollars. The United States maintained that even when Russian oil trades above marginal costs, buyers gain room to negotiate while avoiding a drastic drop in exports that could push prices higher. (Source: Bloomberg)
The broader takeaway is that market dynamics can diverge from simple cap intentions, prompting ongoing debates about the cap’s efficacy and the appropriate balance between limiting revenue to finance conflict and maintaining global oil stability. Analysts continue to monitor how buyers, producers, and policymakers respond as the cap framework proceeds through its review cycles and potential adjustments. (Market commentary)