Freight costs for Russian crude oil shipments from the Baltic Sea ports to India have declined steadily from late May to early June, driven primarily by increased tanker availability. However, industry watchers warn that the trend could reverse if the European Union’s proposed revision to the Russian oil price cap is approved.

The European Union is currently deliberating a new sanctions package aimed at tightening economic pressure on Russia over its invasion of Ukraine. Among the proposals is a significant reduction in the Group of Seven (G7) nations’ price cap on Russian crude oil, from the existing $60 per barrel to $45 per barrel.

The $60 cap, introduced jointly by the G7 and the EU in late 2022, was designed to limit Russia’s oil revenues by banning access to Western maritime services—such as shipping and insurance—for purchases priced above the cap. While the move was initially disruptive to Russian oil exports, it has become less restrictive in recent months.

Since early April, Russia’s benchmark Urals crude has consistently traded below the $60 threshold, enabling Western—especially Greek—shipping firms to legally re-enter the Russian oil market. This resurgence of Western shippers has increased the pool of available tankers, easing logistical constraints and driving down freight costs.

By mid-June, Urals crude loaded from Russia’s key Baltic port of Primorsk was priced at approximately $54.72 per barrel, well below the cap. Correspondingly, the cost of shipping oil from Baltic terminals, including Ust-Luga, to India has dropped to between $5.5 million and $5.7 million per one-way voyage—down from about $6 million in April and May, and significantly lower than the $8 million average seen in March.

Earlier this year, freight rates had spiked sharply following a fresh wave of U.S. sanctions in January targeting Russian energy logistics. The sanctions prompted Russian exporters to scramble for alternative vessels after several of their tankers were blacklisted, triggering a shortage that pushed up costs.

While freight rates remain higher than January’s levels—when shipping costs ranged between $4.7 million and $4.9 million—analysts suggest the market could once again tighten if the EU successfully lowers the price cap. A reduced cap could force Western shippers out of the Russian market, reintroducing supply constraints and putting upward pressure on freight costs.

As geopolitical tensions continue to influence the global energy trade, both oil buyers and shipping providers are watching closely for the outcome of the EU's proposal, which could reconfigure current shipping economics and market access for Russian oil.