European Union governments have tentatively agreed on a $60 a barrel price cap on Russian seaborne oil, with an adjustment mechanism to keep the cap on the oil at 5 per cent below the market price, an EU diplomat said.

The cap is substantially below the present price of crude which was trading at $89.03 a barrel on Thursday.

Poland, which had pushed for the cap to be as low as possible, has until 1500 GMT to agree, which would need to be approved by all EU governments in a written procedure by Friday, the diplomat said.

After the EU, the G7 nations will have to sign on the cap, which will be imposed from December 5. “The price cap is set at $60 with a provision to keep it 5 per cent below market price for Russian crude, based on IEA figures,” the EU diplomat said.

“Poland has until 1600 CET (1500GMT) to agree. If it does there will be a written procedure for adoption until tomorrow,” the diplomat said.

Polish diplomats said consultation with Warsaw was ongoing. EU diplomats said that Lithuania and Estonia, which had backed Poland’s push to set the cap as low as possible, were also on board with the $60 limit. Russian Urals crude was trading at $70.3 a barrel at 1352 GMT.

The price cap on Russian crude was suggested by the Group of Seven (G7) nations to limit Moscow’s revenue from its oil, and therefore its ability to finance its invasion of Ukraine, while avoiding a global supply shock.

The US and the EU have been at odds over the cap: while the US appears to support a cap of $65-70 a barrel, some EU countries wanted a lower level to put the maximum pressure on Russian president Putin as the war with Ukraine stretches into the harsh European winter.

The aim of the price cap is to keep Russian oil flowing into the market, while limiting Russian supplies.

If the cap needs to work, the price will have to be high enough to give Moscow incentives to bring oil in the market. If it is set low, Russia may stop supplies altogether, which will send world oil prices to higher level.

The price cap has big implications for India at a time Russian has emerged as the biggest supplier of crude to India in October.

If India breaches the price cap, it will be at risk of inviting economic sanctions. The US does not want to set a low price cap and risk angering India — a point that its officials have emphasised in their discussions with India.

US treasury secretary Janet Yellen is also supposed to have given an assurance that it would not push for a low cap that would put India in a quandary as it resolves to protect its energy interests.

The US Treasury has been promoting the price cap idea to European allies since the spring of 2022, as they considered and agreed on their phased ban on Russian oil imports to punish Moscow for its invasion of Ukraine.

The price cap will be enforced by denying insurance, shipping and other maritime services provided by G7 democracies and Australia to shipments priced above the cap.