July, 2025 - Sanctions against Russia: UK and EU Lower Oil Price Cap and Expand Measures in 18th Sanctions Package

On 18th July, 2025, the UK and EU jointly announced a significant tightening of the crude oil price cap. The EU also brought in further measures in its 18th sanctions package against Russia.

Lowering the crude oil price cap

The UK and EU have agreed to lower the crude oil price cap (in respect of goods falling under CN code 2709 00) from $60 to $47.60 per barrel. This has been calculated on the basis of current global oil prices, in order to bring the price cap closer to the production costs of oil.

The lower crude oil price cap will come into effect at 23:01 on Tuesday, 2nd September, 2025 in the UK and 3rd September, 2025 in the EU.

The US and other G7 members have not as yet followed the EU and UK.

Premium and discount to crude oil price caps

The price caps in relation to petroleum products under CN Code 2710 remain unaffected: i.e. of $100 on high-value refined oil products (such as diesel and petrol); and $45 on low-value refined oil products, such as fuel oil.

Transitional / wind-down periods

To give businesses time to adapt to the lower price cap, the UK has clarified that for trades with an effective date of contract before Tuesday, 2nd September, 2025, which are compliant with the existing price cap of $60 per barrel, there will be a wind-down period of 45 days, i.e. to Friday, 17th October, 2025. After the wind-down period, the lower price cap of $47.60 per barrel takes effect.

The EU measures however provide for a transitional period to 18th October, 2025 for the execution of any contract concluded before 20th July, 2025. This suggests that contracts entered into on or after 20th July, 2025 which are compliant with the existing price cap of $60 per barrel would need to be wound down by 2nd September, 2025. As it stands there is therefore a difference between the EU and UK wind-down periods for contracts entered into between 20th July, 2025 and 2nd September, 2025.

Dynamic price cap amendments

The EU has also introduced a ‘dynamic automatic procedure’ to modify the price cap for Russian crude oil depending on the average market price of Russian crude oil. This will be determined going forward by assessments provided by authorised reporting agencies, based on which the EU Commission shall calculate the average market price of Russian crude oil over a period of 22 weeks.

This is to ensure that the price cap is 15% lower than the average market price for Russian crude in the previous period of six months, though if there is only a 5% variance or less from the applicable price cap, the price cap will not be amended.

Each time the price cap is amended, the EU has clarified that prior contracts that are compliant with the existing price cap should benefit from a transition period of 90 days.

The EU Commission will publish a notice of the of the average market price and amend the price cap if necessary on 15th January, 2026 and every six months thereafter (unless unforeseen circumstances / extraordinary reviews require otherwise).

It is not yet clear if the UK will follow the same dynamic price cap amendments.

Additional Measures in the EU’s 18th Sanctions Package

Key highlights include:

• Import ban on refined oil products derived from Russian crude
  The 18th package imposes a prohibition, as of 21st January 2026 (i.e. after a transitional period of 6 months), on the purchase, import, or transfer, directly or indirectly into the EU, of petroleum products falling under CN code 2710 obtained in a third country from Russian crude oil falling under CN code 2709, as well as on the provision of related technical or financial assistance, including insurance and re-insurance, related to this prohibition.
  
  The measures provide that at the moment of importation, importers shall provide evidence of the country of origin of the crude oil used for the refining of the product in a third country unless the product is imported from a partner country listed in the regulations (i.e. countries that impose prohibition on imports of Russian oil and petroleum products), namely: Canada, Norway, UK, US and Switzerland. The Commission is expected to issue further guidance on the implementation of this prohibition, in particular as regards the evidence which should be provided by operators engaged in the import of refined petroleum products.
  
  Petroleum products imported from third countries which were net exporters of crude oil in the previous calendar year shall be considered to have been obtained from domestic crude oil and not from crude oil originating in Russia. This applies unless a competent authority has reasonable grounds to believe that they have been obtained from Russian crude oil. Further guidance will elaborate on this provision.
   
• 105 additional ship and further listings
  The EU has sanctioned a further 105 ships, bringing the total number to 444. These ships are banned from EU ports and locks, as well as from receiving a broad range of services related to maritime transport.
  
  Furthermore, two important multinational traders of Russian crude oil, as well as a major customer of the shadow fleet, a refinery in India with Rosneft as its main shareholder, have been designated. For the first time, the EU has also sanctioned a captain of a shadow fleet ship, as well as an operator of an open flag registry. An entity in the Russian LNG sector is also included.
   
• Exemption from the Russian port ban for Kazakh coal
  In the 16th package (as explained further here: February, 2025 - EU introduces 16th package of sanctions against Russia; and UK announces ‘largest sanctions package against Russia since 2022’ - UKDC / UK Defence Club ), the EU brought in a transaction ban in relation to certain Russian ports. The latest package provides for an exemption in relation to Kazakh coal from those ports in order to prevent negative impacts on energy security of third countries around the globe. This position was previously confirmed in EU FAQs.
   
• Ban on Nord Stream and Nord Stream 2
  The latest package introduces a ban in respect of any transaction that is directly or indirectly connected to the natural gas pipelines Nord Stream and Nord Stream 2, subject to certain exemptions.

Further information can be found here:

• UK tightens Oil Price Cap in blow to Putin's war machine - GOV.UK
• UK Financial Sanctions FAQs - GOV.UK
• EU adopts 18th package of sanctions against Russia
• Questions and answers on the 18th package of sanctions against Russia

If Members have any questions in relation to the above issues they are invited to contact the Club for further information.

About the Author:

Charlotte Murphy
Senior Claims Executive
charlotte.murphy@thomasmiller.com

Prior to joining the Club, Charlotte worked for Stephenson Harwood where she was a Managing Associate, providing legal advice to clients on a wide range of shipping matters for over 15 years.