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Limit the price of Russian oil at $60 a barrel in Western countries

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Russia should face, starting from Monday, a cap on the price of a barrel of its oil at $ 60, after the agreement concluded by the European Union, the Group of Seven countries and Australia, in order to limit Moscow’s entry to finance the conflict. in Ukraine.

G7 and Australia […] A consensus has been reached on a price cap of $60 per barrel for Russian crude oil transported by sea.”These states announced in a joint press release published on Friday, December 2.

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US Treasury Secretary Janet Yellen welcomed the announcement “It is the culmination of months of efforts by our coalition.”. “We still achieve our goal and the Russian economy will be destroyed, and it will pay and bear all its crimes”said the Chief of Staff of the Ukrainian Presidency, Andriy Yermak, in a telegram, according to WHO “However, it was necessary to lower (the ceiling price) to $30 in order to destroy it more quickly.”.

Valid on Monday

The agreement was reached through a consensus reached by the 27 countries of the European Union.

The finance ministers of the Group of Seven countries had agreed in early September on this tool, which aims to deprive Russia of financial means.

Concretely, the price set must be high enough for Russia to have an interest in continuing to sell them oil, but below the price to limit the income it can make from it.

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The mechanism will go into effect on Monday “or a little later.”, select G7 and Australia. It is already Monday that the European Union’s ban on the transportation of Russian oil by sea begins.

Thus, only oil sold by Russia at a price equal to or less than $60 can continue to be delivered. Beyond this cap, companies are prohibited from providing services that allow sea transportation (freight, insurance, etc.).

Currently, the G7 countries provide insurance for 90% of global shipments, and the EU is a major player in ocean freight – providing a reliable deterrent, but also risking losing markets to competitors.

adjust the price

Russia, the world’s second largest exporter of crude oil, for its part, warned that it would no longer supply oil to countries that would adopt this cap. Without this ceiling, it would be easy for him to find new buyers at the market price. The price of a barrel of Russian oil (crude from the Urals) is currently hovering around $65, just above the European ceiling, indicating limited impact in the short term.

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We will be ready to review the maximum price and adjust it if necessary.I confirm the G7 and Australia in their press release. A cap should also be set on Russian petroleum products from February 5, 2023.

The European ban comes several months after the one already decided by the United States and Canada. But Westerners also have to contend with the interests of powerful British insurers or Greek shipowners.

“The European Union remains united and stands in solidarity with Ukraine”He welcomed the Czech presidency of the Council of the European Union in a tweet.

Russia has earned 67 billion euros from its oil sales to the European Union since the start of the war in Ukraine, while its annual military budget comes to about 60 billion, recalls Phuc-Vinh Nguyen, an expert on energy issues at the Jacques Delors Institute. .

sequel after announcement

Fears of destabilizing the market

The tool proposed by Brussels plans to add a certain limit at 5% below the market price, in case Russian oil falls below $60. In fact, some experts fear destabilizing the global market and wonder about the reaction of the OPEC producing countries that meet Sunday in Vienna.

This cap will help stabilize global energy markets […] It will directly benefit emerging economies and developing countries.”As Russian oil can be delivered to them at prices below the ceiling, on the contrary, confirmed the President of the European Commission, Ursula von der Leyen, on Twitter.

From Monday, the European Union’s embargo on Russian oil transported by sea will eliminate two-thirds of its purchases of crude from Russia. After Germany and Poland also decided to halt their oil pipeline deliveries by the end of the year, total Russian imports will be affected by more than 90%, the Europeans say.

in contrast, The oil price ceiling has never been seen. We are in the unknownPhuc-Vinh Nguyen is annoyed, stressing that the reaction of OPEC countries or large buyers such as India and China will be decisive.

The only certainty, according to him: cover, even at a high price, he will send ‘Strong political signal’ To Russian President Vladimir Putin, because once this mechanism is activated, it can be tightened.

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