The member states of the European Union have agreed after long negotiations on a price cap for Russian oil transported by sea. This was announced by the Czech Presidency this evening.
The Europeans want to force Russia to sell its oil to third countries at a maximum price of 60 dollars (57 euros) per barrel. The recent market price for a barrel of Ural oil from Russia was about 65 dollars (62 euros).
Strike financing of war machine
The measure comes on top of the introduction of a European embargo on the import of Russian oil by sea, which takes effect on Monday. Both measures should affect the financing of the Russian war machine in Ukraine. For example, Russia, the second largest exporter of crude oil, has received €67 billion from oil sales to the European Union since the start of the invasion. That’s more than the Kremlin’s annual military budget.
In concrete terms, member states are now banning European companies from providing services that enable the transport of Russian oil that is sold at more than $60 a barrel. The measure is being rolled out in coordination with the international partners within the G7: the United States, the United Kingdom, Canada and Japan.
Impact
Western countries can have an impact on Russian oil supplies to third countries such as India and China because they control important support services. For example, the G7 countries currently provide insurance services for 90 percent of global cargo. The EU is also a major player in maritime freight transport.
At the same time, it remains possible for Western shipping companies and other service providers to bring Russian oil to third countries, as long as the oil is sold at a lower price. This should stabilize the energy markets somewhat and provide relief to poorer countries. “This price cap will directly benefit emerging economies and developing countries,” European Commission President Ursula von der Leyen assured in response to the agreement.
To respond to developments in the market, the price cap will be reviewed every two months. The price of Russian oil as quoted by the International Energy Agency (IEA) will be used as a reference. The ceiling must always remain at least five percent below that reference price.
Poland attempt
There has been consensus at European level for some time on the principle of a price cap, but Poland has been trying in recent days to push through a lower maximum price. With support from the Baltic states, the country pushed for a cap of $30 (28.5 euros) per barrel, a level close to production costs, which are estimated to be between $20 and 40 (19 and 38 euros) per barrel. barrel.
Quote
Every dollar counts. Every dollar we can negotiate down means an estimated $2 billion less revenue for Russia.
“Every dollar counts. Every dollar we can negotiate down means an estimated $2 billion less revenue for Russia,” said Estonian Prime Minister Kaja Kallas. Finally, the Poles and the Balts gave up their attempt today. As part of the deal, according to Kallas, a ninth sanctions package against Moscow would soon be made.
A price cap in the region of USD 30 met with objections from countries with a large shipping industry, such as Greece and Malta. They feared that a price that was too low could encourage shipping companies to relocate if Russia refused to sell its oil at a lower price.
LOOK. Earlier, a European agreement was also found on the approach to gas prices
Free unlimited access to Showbytes? Which can!
Log in or create an account and don’t miss a thing of the stars.