WASHINGTON/BRUSSELS: The Group of Seven (G7) countries and Australia said on Friday they had imposed a $60 per barrel tariff on Russian offshore oil after EU members overcame Polish resistance and hammered out a political deal. A barrel price range has been agreed upon.
The EU agreed to the price after backing holdout Poland, paving the way for formal approval at the end of the week.
The G7 and Australia said in a statement that the price cap would come into force on or shortly after December 5.
Nations said they expect any price revisions to include some form of allowing for compliant transactions before the change.
“The price cap coalition may also consider further action to ensure the effectiveness of the price cap,” the statement said. No details were immediately available on what further steps 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 European Union imposed a ban on Russian crude from December 5.
Warsaw had resisted the proposed level as it examined adjustment mechanisms to keep the cap below market value. He has pushed for cuts in EU negotiations to squeeze revenue from Russia and limit Moscow’s ability to finance its war in Ukraine.
Poland’s ambassador to the EU, Andrzej Sados, told reporters on Friday that Poland supported the EU deal, which includes a mechanism to keep the oil price cap at at least 5 percent above the market rate. U.S. officials said the deal was unprecedented and demonstrated the commitment of the alliance to oppose Russia’s war.
A spokesman for the Czech Republic, which holds the rotating EU presidency and oversees EU countries’ negotiations, said it had formally ratified the deal for all 27 EU countries, following Poland’s approval. The written procedure for greenlighting has started.
Details of the deal are due to be published in the EU’s legal journal on Sunday.
EU is having a significant impact on Russian revenues.
European Commission President Ursula van der Leyen said the price cap would significantly reduce Russia’s income.
“This will help us stabilize global energy prices, which will benefit emerging economies around the world,” von der Leyen said on Twitter, adding that the market was reacting to developments. This cap will be “adjusted over time”.
The G7 price cap would allow non-EU countries to continue importing Russian crude oil by sea, but would prohibit shipping, insurance and reinsurance companies from handling Russian crude cargoes around the world. , unless it is sold below the price limit. .
Since the most important shipping and insurance firms are in the G7 countries, the price cap will 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 suffer from high energy and food prices.
“With Russia’s economy already shrinking and its budget shrinking rapidly, a price ceiling would immediately cut into Putin’s most important source of income,” Yellen said in a statement.
A senior U.S. Treasury official told reporters on Friday that a $60-a-barrel price ceiling on Russian offshore oil would keep global markets well-supplied, while calling the discounting of the ceiling’s risk “institutionalization.” “Will be done.
The head of the Russian lower house’s foreign affairs committee told the Tass news agency on Friday that the European Union is putting its energy security at risk.
The initial G7 proposal last week was for a price range of $65-$70 per barrel with no adjustment mechanism. As Russian Urals crude is already trading lower, Poland, Lithuania and Estonia pushed for lower prices.
On Friday, the price of Russian Urals crude oil was around $67 per barrel.
After days of squabbling over details, EU countries added terms to the deal – including that the price ceiling be reviewed in mid-January and every two months thereafter, diplomats said on Thursday. According to an EU document seen by JEE News.
The document also states that a 45-day transition period will apply to vessels carrying Russian crude oil that were loaded before December 5 and unloaded at their final destination by January 19, 2023.
