By Jan Strupczewski, Kate Abnett, David Lawder and Andrea Shalal
WASHINGTON/BRUSSELS (RockedBuzz via Reuters) – Group of Seven (G7) nations and Australia said on Friday they agreed on a price cap of $60 a barrel for seaborne Russian crude after European Union members overcame Poland’s resistance and reached a political agreement earlier in the day.
The EU agreed on the price after Poland gave its support, paving the way for formal approval over the weekend.
The G7 and Australia said in a statement that the price cap would go into effect on or soon after December 5.
The nations said they anticipated any price revisions would include a grandfathered form to allow for compliant transactions concluded before the change.
“The Price Cap Coalition may also consider further actions to ensure the effectiveness of the price cap,” the statement read. No details were immediately available on what further action could be taken.
The price cap, a G7 idea, aims to reduce Russia’s revenue from oil sales while preventing a rise in global oil prices after the EU embargo on Russian crude came into force on 5 December.
Warsaw had resisted the proposed level while examining an adjustment mechanism to keep the ceiling below the market price. He had pushed in EU negotiations for the limit to be as low as possible to squeeze revenue out of Russia and limit Moscow’s ability to finance its war in Ukraine.
Polish ambassador to the EU, Andrzej Sados, told reporters on Friday that Poland supported the deal with the EU, which included a mechanism to keep the maximum oil price at least 5% below of the market rate. US officials said the deal was unprecedented and demonstrated the determination of the coalition that opposes Russia’s war.
A spokesman for the Czech Republic, which holds the EU’s rotating presidency and oversees EU countries’ negotiations, said it had started the written procedure for all 27 EU countries to formally give the green light to the deal. after the approval of Poland.
Details of the deal are expected to be published in the EU legal review on Sunday.
EU SEES SIGNIFICANT HUMP TO RUSSIAN REVENUE
European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenue.
“It will help us stabilize global energy prices, which will benefit emerging economies around the world,” von der Leyen said on Twitter, adding that the limit will be “adjustable over time” to react to market developments.
The G7 price cap will allow non-EU countries to continue importing seaborne Russian crude, but will ban shipping, insurance and reinsurance companies from moving cargoes of Russian crude around the world unless it is sold at a price lower than the maximum price.
Since the most important shipping and insurance companies are based in the G7 countries, the price cap would make it very difficult for Moscow to sell its oil at a higher price.
US Treasury Secretary Janet Yellen said the cap would particularly benefit low- and middle-income countries that have borne the brunt of high energy and food prices.
“With Russia’s economy already shrinking and its budget shrinking, the cap will immediately cut Putin’s most important source of revenue,” Yellen said in a statement.
A senior US Treasury Department official told reporters on Friday that the $60-per-barrel price cap on seaborne Russian crude will keep global markets well supplied while “institutionalizing” the discounts created by the threat of such a cap.
The chairman of the Russian lower house’s foreign affairs committee told the Tass news agency on Friday that the European Union was jeopardizing its own energy security.
The G7’s initial proposal last week envisioned a maximum price of $65-70 a barrel with no adjustment mechanism. With Russian Ural crude already trading lower, Poland, Lithuania and Estonia pushed for a lower price.
Russian Ural crude traded at around $67 a barrel on Friday.
EU countries have been debating the details for days, with those countries adding conditions to the deal, including that the price cap will be reviewed in mid-January and every two months thereafter, according to diplomats and an EU visa document from RockedBuzz via Reuters on Thursday.
The document also states that a 45-day transition period would apply to ships carrying Russian crude loaded before December 5 and unloaded at its final destination by January 19, 2023.
(Reporting by Jan Strupczewski and Kate Abnett in Brussels and David Lawder, Andrea Shalal and Daphne Psaledakis in Washington; editing by Geert De Clercq, Philippa Fletcher, Barbara Lewis, Alistair Bell and Daniel Wallis)
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