G7 allies – Britain, Germany, Italy, Canada, France, Japan and the USA – have announced that they have agreed on a ceiling price for Russian oil.
“Together with Australia, the G7 joins the EU and accepts a $60 per barrel ceiling for seaborne oil from Russia,” the G7 said in a statement.
The document states, “Next week, the Price Ceiling Coalition [G7, ЕС и Австралия] It will ban a wide range of services, including shipping insurance and trade finance, related to the shipping of Russian crude oil.”
Exceptions would be buyers importing fuel at US$60 per barrel or less. The restrictions will come into effect on December 5, 2023.
Countries are expected to set a “termed exception for transactions involving oil loaded onto ships at ports of departure before 5 December 2022” in the rules.
Details of the ceiling price and its application will be published by the participating countries in a short time. In addition, experts will discuss the measures to be taken in case of violations of sanctions.
It was noted that the G7 countries and Australia wanted to “carefully monitor the effectiveness and impact of the price ceiling”. “We will be ready to review and adjust the maximum price as necessary,” the message emphasizes.
Adjustment depends on the level of ‘the effectiveness of the measures and how they are implemented and implemented, as well as how they are applied internationally’. It will consider “the evolution of the market situation and the potential impact on coalition members and partners, including low and middle income countries”.
A diplomatic source had previously told Politico that the system would be reviewed every two months. The goal is to keep the cap 5% below the market price of Russian oil.
The ceiling price for Russian petroleum products will begin to apply from February 5, 2023. The G7 promised that “we will also announce the maximum prices for Russian petroleum products”.
The joint call of the G7 and Australia confirms that the countries want to gradually remove Russian oil and oil products from their domestic markets. This decision will not change with the actual implementation of the price ceiling.
“To the contrary, the price ceiling aims to ensure a stable supply of energy resources while limiting Russia’s revenue, by allowing our service providers to support the supply of Russian-origin crude oil and petroleum products to other countries,” the document says.
But Japanese officials fear Russia will retaliate, according to Kyodo’s report, citing government sources.
Tokyo, in particular, believes that if Russia stops exporting oil to countries participating in the sanctions, world prices will rise again as demand exceeds supply. This will have a negative impact on the Japanese economy, which is already under pressure due to the global trend towards higher prices for resources and goods.
TASS writes that previously the USA and the European Union have decided that operations related to the sea transport of oil produced under the Sakhalin-2 project to Japan (this is how Japan gets LNG) will not be limited by price ceiling rules.
Almost simultaneously with the G7, European Commission President Ursula von der Leyen announced that the EU has agreed to limit the price ceiling to $60 per barrel. He wrote on his Twitter page: “The EU oil price ceiling agreement agreed with the G7 and others will significantly reduce Russia’s revenues.”
He believes such a measure will help stabilize “global energy prices, which will benefit emerging economies worldwide.”
The EU decision will enter into force as soon as it is published in the Official Journal of the Union.
The US Treasury believes that the agreed maximum price per barrel of oil is “high enough to provide a clear economic incentive for Russia to continue selling oil on world markets.”
This level is claimed to be “higher than the cost of production and comparable to the prices at which Russia was selling oil before the start of special operations in Ukraine.”
Kyiv is not happy with such a decision of the allies. Presidential President Andriy Yermak said the “ceiling” should be twice as low: “It will be necessary to lower it to $30 in order to quickly destroy the enemy’s economy.”
The Russian Embassy in the US said Washington and its partners are reshaping the basic principles of how free markets work. Diplomats argue that this could lead to increased uncertainty and higher costs for raw material consumers.
“The Collective West is trying to solve the problems it has created from scratch, with an insistence that is worth making better use of. In fact, we are talking about reshaping the basic principles of the functioning of free markets.”
The diplomatic mission noted that any country can now be subject to a “ceiling for exports for political reasons”.
Leonid Slutsky, chairman of the State Duma Committee on International Relations, recalled that “no price restrictions are unacceptable” for Russia. “There will be no oil supply to countries under price ceiling conditions, even if that happens. [ограниченные поставки] it will be more profitable,” stressed the deputy in a meeting with TASS.
He also believes that the EU is “endangering its energy security”. “They didn’t install a ceiling, but they broke the bottom again. And for what? In order to satisfy the ambitions of overseas partners. But Europeans cannot expect help from them, ”sure Slutsky.
Russian Foreign Minister Sergei Lavrov has previously emphasized that Moscow is not interested in what the oil price ceiling will be. “We will meet directly with our partners, and partners who continue to work with us will not look at these ceilings and will not give any guarantees to anyone who illegally introduces these ceilings.”