The EU has agreed on a ceiling of $60 per barrel. There is an option to change the ceiling price to keep the limit 5% below the market value.
“ambassadors [27 стран ЕС] agreed on a ceiling price for Russian oil transported by sea. The Czech Delegation to the EU Council said on Twitter that the decision will enter into force after it is published in the EU Official Journal.
The written procedure at the council is formal, approval takes place without further deliberation. Initially initiating the price cap, the G7 plans to implement the measure on Monday, December 5. But Warsaw’s ambassador to the EU, Andrzej Sados, had previously said the document would likely be signed over the weekend. He noted that the deal offers the option to change the ceiling to keep the limit 5% below market value.
“Poland has agreed to an EU compromise to set a cap on Russian oil of $60 per barrel, allowing the EU to formally approve this decision over the weekend,” Sadosia said. said.
In September, the G7 Finance Ministers (UK, Germany, Italy, Canada, USA, France and Japan) confirmed their intention to limit Russian oil prices. December 5 – for crude oil, February 5, 2023 – for petroleum products. The Russian side, represented by Russian President Vladimir Putin and Deputy Prime Minister Aleksandr Novak, stated that it will not supply anything abroad if it goes against Moscow’s interests. Novak noted that the Russian Federation will not accept any proposed price limit and that such restrictions only mean interference with market mechanisms.
Washington approval and price regulation
The EU deal has already been ratified in the US. White House spokesman John Kirby said: “We have seen the messages and welcome the progress made. We support the introduction of a price cap.” However, he did not comment on the details and noted that the details will be determined by EU officials.
Ursula von der Leyen, head of the European Commission, confirmed that a price cap was set for Russian oil and said it would be regulated.
“Today, the EU, G7 and other global partners agreed to set a ceiling on the price of Russian offshore oil. This will significantly reduce Russia’s income, help us stabilize world energy prices, which will benefit emerging market countries around the world. This ceiling will be adjusted over time,” he said.
State Department economist Emily Blanchard said at a foreign press conference that the United States and the “international coalition” (G7, EU and Australia) are trying to reduce Russian revenues that could be directed to the needs of a special group, using restrictions on oil purchases. Operation in Ukraine and prevent a global energy crisis. He believes the $60 ceiling is ideal to achieve these goals in the short term.
Blanchard said he looks forward to a ceiling price for all Russian oil.
“If targets are not met, then the price ceiling can be adjusted over time to make sure we reach them,” Blanchard added.
In October, the Financial Times reported that Washington thinks limiting the price of Russian oil is beneficial for developing countries. Thus, the White House believes the border will allow the 50 largest developing countries to save about $160 billion a year, with China and India receiving the main benefits.
acceptable limit
Yury Rykov, head of the energy department of the Institute of Energy and Finance, said in a conversation with Lenta.ru that the $ 60 limit is reasonable for all parties.
“A while ago, the US suggested setting the bar at $60. In principle, the bottom bar of the quoted is $ 60. After all, this is a normal price, not the $30 that the Baltics and Poland are lobbying for,” he said.
According to him, the most important reaction to this situation will be the reaction of Moscow. So, according to him, it is important how many exceptions the European Commission (EC) accepts to this provision.
Tender Limits and Oil Refusal
The limit debate has been going on since November and was based on different price options. Warsaw reportedly insisted on $30 a barrel and found the $60 compromise too high when offered $70 as in Athens.
Bloomberg wrote that Poland insisted on imposing sanctions on the northern branch of the Druzhba oil pipeline (via Belarus) in order to obtain legal grounds for termination of contracts and avoid fines by Russian suppliers.
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.