G-7 joins the EU with a price limit of 60 dollars per barrel of Russian oil

WASHINGTON (AP) – The Group of Seven nations and Australia joined the European Union on Friday in agreeing to a $60-a-barrel price cap on Russian oil, a major step toward re-regulating the global oil market amid Western sanctions. prevent price gouging and deprive President Vladimir Putin of financing his war in Ukraine.

Europe had until Monday, when Europe imposed an embargo on Russian oil shipped by sea, to set a discounted price that other countries would pay. and the ban on insuring these supplies comes into effect. A price cap led by the G-7 rich democraciesaims to prevent a sudden loss of Russian oil to the world, which could lead to a new increase in energy prices and more fuel inflation.

US Treasury Secretary Janet Yellen said in a statement that the deal would help “limit the main source of revenue for Putin’s illegal war in Ukraine while preserving the stability of global energy supplies.”

The agreement was reached after last-minute negotiations. Poland has long maintained an EU agreement that seeks to set the threshold as low as possible. After more than 24 hours of negotiations, Warsaw finally backed down on Thursday when other EU countries said they would back the deal.

A joint G-7 coalition statement released on Friday said the group is “ready to review and adjust the maximum price accordingly” given market developments and the potential impact on coalition members and low- and middle-income countries.

Estonian Prime Minister Kaja Kallas said that “undermining Russia’s energy revenues is the basis for stopping Russia’s war machine,” adding that she was happy to see a few extra dollars cut from previous proposals. He said that every dollar the cap is cut is $2 billion less for Russia’s war chest.

“It’s no secret that we wanted the price to be lower,” Kallas said, highlighting differences within the EU. “The price between 30-40 dollars will seriously damage Russia. However, this is the best compromise we can come up with.”

The $60 figure is close to the current price of Russian crude oil, which has recently fallen below $60 per barrel. Some criticize it as not being low enough to cut off one of Russia’s main sources of income. That’s still a big discount to international Brent crude, which fell to $85.48 a barrel on Friday, but may be high enough to keep selling even as Moscow rejects the idea of ​​cutting the limit.

For the global oil market, there is a risk of losing a large amount of crude oil from the world’s No. 2 producer. This could raise the price of gasoline for motorists caused political upheaval for US President Joe Biden all over the world and leaders of other nations. Europe is already plunged into an energy crisisgovernments face protests over the rising cost of livingdeveloping countries are more sensitive to changes in energy costs.

But the West has faced increasing pressure to target one of Russia’s main money-makers — oil — cutting off funds to Putin’s war chest and damaging the Russian economy The war in Ukraine continues into its ninth month. The price of oil and natural gas increased sharply A post-pandemic demand rebound and subsequent Ukraine invasion stabilized energy markets that fed Russian coffers.

US National Security Council spokesman John Kirby told reporters on Friday that “the cap itself will have the desired effect of limiting Mr. Putin’s ability to profit from oil sales and his ability to use that money to finance his war machine.”

However, more uncertainty lies ahead. COVID-19 restrictions in China and a global economic slowdown could make oil less thirsty. That’s what OPEC and allied oil producers, including Russia, signaled in October to cut global supply.. OPEC+ is scheduled to meet again on Sunday.

It competes with an EU embargo that could take more oil supplies off the market, raising fears of a supply squeeze and higher prices. Russia exports about 5 million barrels of oil per day.

Putin said he would not sell oil under the price cap and would respond to countries that imposed the measure. However, Russia has already diverted most of its supplies to India and China and other Asian countries at discounted prices because Western customers avoided it even before the EU embargo.

Most insurers are based in the EU or the UK and may be required to participate in a price cap.

Russia can also sell oil off the books using “dark fleet” tankers whose ownership is obscure. To hide its origin, oil could be transferred from one vessel to another and mixed with oil of a similar quality.

Even under such circumstances, a ban would make it “more expensive, time-consuming and difficult” for Russia to sell oil around the restrictions, according to Maria Shagina, a sanctions expert at the International Institute for Strategic Studies in Berlin.

Robin Brooks, chief economist at the Institute of International Finance in Washington, said the price cap should have been imposed this summer when oil was around $120 a barrel..

“Obviously, oil prices have fallen since then and a global recession is a real thing,” he said. “The reality is that with oil prices right now, it’s unlikely to be mandatory.”

European leaders have announced their work on Yellen’s idea of ​​a price ceiling.

Ursula von der Leyen, president of the European Commission, the EU’s executive arm, said the EU’s oil price cap deal, agreed with the G7 and others, would significantly reduce Russia’s revenues. “This will help stabilize global energy prices, benefiting developing economies around the world.”


Casert reported from Brussels and McHugh from Frankfurt, Germany. AP reporter Aamer Madhani contributed from Washington.

Source link