Economy 2024-05-15T05:24:30+03:00
Ukrainian news
EU Agrees On Price Cap For Russian Oil At USD 60 Per Barrel

EU Agrees On Price Cap For Russian Oil At USD 60 Per Barrel

European Union, Russian oil, import of Russian oil, Russian oil price, price cap, price cap for Russian oil

The European Union has agreed to set the price cap of Russian oil at USD 60. It is reported by Bloomberg with reference to the representative of the Polish diplomatic mission. Several diplomats also told this to The Wall Street Journal. The EU will be able to review this price cap every two months starting January 15, 2023.

The marginal price at which European governments converged was higher than the one at which Russia sells oil now. At the end of last week, Argus Media and Platts reported that at the ports of Primorsk and Novorossiysk it was shipped at USD 52 per barrel. At the beginning of this week, the price dropped to USD 45.31 in Primorsk, and on Wednesday it was USD 48 per barrel, according to Argus Media.

At the same time, the price cap was lower than what was originally planned (USD 65-70 per barrel). Poland and the Baltic states demanded to reduce the level. States transporting Russian oil, including Greece and Malta, did not want to lower the ceiling below USD 70.

The EU decision provides for an adjustment mechanism within which it will be possible to regularly revise the limit: it should be at least 5% lower than the average market price. This measure should allow the future more strongly limiting the income of the Russian Federation from the sale of hydrocarbons and not leading to a jump in oil prices after the introduction of the limit. In addition, the very presence of the price cap allows buyers to demand large discounts from Russia, insists the U.S. Treasury Department, which has developed a price cap mechanism.

The restriction still needs official approval until December 5, when EU sanctions on Russian oil will come into force. After the final decision by the European Union countries, all the G7 countries and Australia will join it.

As Ukrainian News Agency earlier reported, the Russian Federation said that it would not sell hydrocarbons to anyone who would adhere to the price cap. But G7 countries will stop importing Russian oil by the end of this year, and from big buyers of Moscow China, India and Turkey will remain. Therefore, the main goal of restrictions is agreements with these countries. Companies involved in the transportation of Russian oil will be able to receive financing and insurance (and more than 90% of tankers in the world insure and reinsure European companies) only if it is purchased at a price not higher than the price cap.