EU enforces lower oil price cap on Russia from September 3, 2025

On August 6, 2025, the European Union announced the reduced oil price cap on Russian oil, which will come into effect on September 3, 2025. This cap, introduced under the EU’s 18th sanctions package, is set at $45 per barrel, down from the previous static limit of $60 per barrel established by the G7 in December 2022. The new cap signifies Europe's ongoing commitment to tighten economic pressure on Russia amid its invasion of Ukraine and aims to reduce the Kremlin’s vital revenue from oil sales without destabilizing global energy markets. The price ceiling has significant implications for the energy sector, reflecting the international community's effort to mitigate Russia's funding for its war efforts. Alongside the price cap, other sanctions, such as a ban on financial transactions involving 22 additional Russian banks, took effect just before the cap was set to go into action. EU officials believe that the dynamic pricing mechanism is necessary to adapt to fluctuating market conditions, recalculating a maximum price as 15% below the average global market price for the prior three months. This approach seeks to balance the reduction of Russia’s oil revenue while attempting to prevent any severe supply shocks that could affect global markets. The effort marks a pivotal development in the EU’s strategy towards Russia, showing a commitment to penalize the nation for its ongoing aggression while simultaneously addressing international market stability. Overall, the sanctions package reinforces the significance of oil and gas revenues, as they account for nearly one-third of Russia’s federal income, further underlining the economic stakes involved.