The sanctions will prohibit trade in Russian crude if prices exceed the cap and will restrict shipping, insurance, and re-insurance services for such cargoes.

To compensate for declining oil revenues, Russia has had to tap into its financial reserves, a move driven by lower oil prices and OPEC+ production decisions.

Oil and gas exports remain a vital part of Russia's economy, constituting about 30% of the state budget, prompting the country to make necessary budget adjustments due to lower-than-expected oil prices for 2025.

The new measures aim to restrict trade and shipping of Russian oil if prices exceed the cap, and exclude Western insurance and financial support for such transactions.

Negotiators have reportedly agreed on all components of the sanctions, with a formal announcement expected on July 14, 2025, just ahead of a scheduled EU foreign ministers' meeting.

Additional pressures on Russia's oil market come from U.S. tariffs and OPEC+ plans to increase oil production by 548,000 barrels per day in August 2025, likely further lowering market prices.

The European Union is preparing to implement a new sanctions package targeting Russia's oil exports, including lowering the current price cap from $60 to around $47 per barrel, to limit Russia's revenue supporting its military actions in Ukraine.

Slovakia initially hesitated but has now expressed support for the sanctions after securing assurances from the European Commission regarding a phased reduction of Russian gas supplies.

These sanctions will include a floating, dynamic price cap set at approximately 15% below the average market price over the past three months, with reviews every six months to adapt to market fluctuations.

Russia is facing significant economic challenges, with officials warning that key financial tools are nearly depleted, and recent reports indicate an 18% drop in oil revenues in the second quarter of 2025, the lowest since the invasion of Ukraine.

Russia is increasingly relying on a coalition of politically unstable countries, known as g7+, for oil transportation, now handling over half of Russian oil exports, as it reduces dependence on its shadow fleet.

The initial price cap is projected to be around $47 per barrel, based on recent market averages, with a review mechanism every six months to adjust the cap accordingly.