Europe bans Russian diesel, oil products over conflict

FRANKFURT, Germany — Europe on Sunday imposed a ban on Russian diesel fuel and other refined oil products, slashing energy dependency on Moscow and seeking to further crimp the Kremlin's fossil fuel earnings.

The ban came along with a price cap agreed by the G7 group.

Diesel is key for the economy because it is used to power cars, trucks carrying goods, farm equipment and factory machinery. Diesel prices have been elevated due to recovering demand after the COVID-19 pandemic and limits on refining capacity, contributing to inflation for other goods worldwide.

The new sanctions would create uncertainty about prices as the 27-nation European Union finds new supplies of diesel from the United States, Middle East and India to replace those from Russia, which at one point delivered 10 percent of Europe's total diesel needs. Those are longer journeys than from Russia's ports, stretching available tankers.

The price cap of $100 per barrel for diesel, jet fuel and gasoline is to be enforced by barring insurance and shipping services from handling diesel priced over the limit. Most of those companies are located in Western countries.

It follows a $60-per-barrel cap on Russian crude that took effect in December and is supposed to work the same way.

Diesel fuel at the pump has been flat since the start of December, costing $1.94 per liter as of Jan 30, according to the weekly oil market report issued by the EU's executive commission. Pump prices in Germany, the EU's largest economy, fell 2.6 cents to $1.97 per liter as of Jan 31.

55-day grace period

The ban provides for a 55-day grace period for diesel loaded on tankers before Sunday, a step aimed at avoiding the ruffling of markets.

Meanwhile, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman warned on Saturday that sanctions and underinvestment in the energy sector could result in a shortage of energy supplies.

In response to a question on how the sanctions environment would affect the energy market, the prince told an industry conference in Riyadh: "All of those so-called sanctions, embargoes, lack of investments, they will convolute into one thing and one thing only, a lack of energy supplies of all kinds when they are most needed."

The prince did not specifically mention Russia in his remarks. He said Saudi Arabia was working to send Ukraine liquefied petroleum gas, which is most commonly used as a cooking fuel and in heating.

Agencies Via Xinhua