G-7 joins EU on $60-per-barrel price cap on Russian oil

WASHINGTON (AP) – The Group of Seven nations and Australia joined the European Union on Friday in adopting a $60 per barrel price cap on Russian oil, a significant step as Western sanctions aim to rebalance the global oil market. Is. To prevent price rise and starve President Vladimir Putin of funds for his war in Ukraine,

Europe needed to set the concessional price other countries would pay by Monday, when the EU will impose sanctions on Russian oil shipped by sea And the ban on insurance for those supplies goes into effect. Price cap, led by the G-7 rich democraciesAim to prevent sudden loss of Russian oil to the world that could lead to a new surge in energy prices And further fuel inflation.

US Treasury Secretary Janet Yellen said in a statement that the agreement would help restrict Putin’s “primary source of revenue for his illegal war in Ukraine, as well as preserve the stability of global energy supplies.”

The agreement was reached after last minute talks. Poland prolonged the EU agreement, seeking to set the cap as low as possible. After more than 24 hours of deliberations, after other EU countries indicated they would back the deal, Warsaw relented late Friday.

A joint G-7 coalition statement released on Friday said the group will review and adjust the cap price “taking into account market developments and potential impacts on coalition members and low- and middle-income countries”. is ready.

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Estonian Prime Minister Kaja Kailas said, “Reducing Russia’s energy revenues is at the core of stopping Russia’s war machine.” He said the limit on each dollar for Russia’s war fund was reduced to $2 billion.

“It’s no secret that we wanted the price to be lower,” Callas said, highlighting differences within the EU. “A price of between $30-40 would hurt Russia significantly. However, this is the best compromise we can get.”

The $60 figure sets the cap near the current price of Russian crude, which recently fell below $60 a barrel. Some criticize that isn’t low enough to cut one of Russia’s main sources of income. That’s still a big discount to international benchmark Brent, which fell to $85.48 a barrel on Friday, but could be high enough for Moscow to continue selling even as it rejects the idea of ​​a cap.

Losing a significant amount of crude from the world’s No. 2 producer is a huge risk to the global oil market. This could drive up gasoline prices for drivers around the world, which has created political turmoil for US President Joe Biden and leaders in other countries. Europe is already grappling with an energy crisisGovernments are facing protests over rising cost of livingWhile developing countries are even more sensitive to changes in energy costs,

But the West is facing mounting pressure to target one of Russia’s main financiers Oil – to reduce money flowing into Putin’s war fund and hurt Russia’s economy As the war in Ukraine is in its ninth month. Oil and natural gas prices have skyrocketed After the pandemic and then the invasion of Ukraine destabilized energy markets, demand fed Russia’s coffers.

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John Kirby, a spokesman for the US National Security Council, told reporters on Friday that “the cap is designed to limit Mr Putin’s ability to profit from oil sales and continue to use that money to fund his war machine”. Doing so will have the desired effect.”

However, more uncertainty lies ahead. COVID-19 Restrictions in China And a slowing global economy could mean less thirst for oil. That’s what prompted OPEC and allied oil-producing nations, including Russia, to cut supplies to the world in October., The OPEC+ alliance is due to meet again on Sunday.

It competes with an EU embargo that could take more oil supplies out of the market, raising fears of a supply shortfall and higher prices. Russia exports about 5 million barrels of oil per day.

Putin has said he will not sell oil under the price cap and will retaliate against countries that impose the measure. However, Russia has already diverted most of its supplies to India, China and other Asian countries at discounted prices because Western customers have already avoided it before the EU ban.

Most insurers are based in the European Union or the United Kingdom and may be required to participate in price caps.

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Russia can also sell oil off the books, using “dark fleet” tankers with obscure ownership. The oil could be transferred from one ship to another and mixed with oil of similar quality to hide its origin.

Maria Shagina, a sanctions expert at the International Institute for Strategic Studies in Berlin, said that even under those circumstances, the cap would make it “more expensive, time-consuming and cumbersome” for Russia to sell oil to get around the sanctions.

Robin Brooks, chief economist at the Institute of International Finance in Washington, said the price cap should have been implemented this summer when oil was hovering around $120 a barrel.,

“Since then, clearly oil prices have fallen and the global recession is a real thing,” he said. “The reality is that it is unlikely to be binding where oil prices are now.”

European leaders tout their work on Yellen’s brainchild price cap,

“The EU agreement on oil price caps, coordinated with the G7 and others, will significantly reduce Russia’s revenues,” said Ursula von der Leyen, president of the European Commission, the EU’s executive branch. “This will help us stabilize global energy prices, which will benefit emerging economies around the world.”

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Cassart reported from Brussels and McHugh from Frankfurt, Germany. AP reporter Amer Madhani contributed from Washington.

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