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 agreeing to a $60-a-barrel price cap on Russian oil, a major step as Western sanctions target The global oil market is to be restructured. Stop rising prices and cut President Vladimir Putin’s funding for his war in Ukraine.

Europe was required to set the discount price that other countries would pay on Monday, when the European Union’s Russian oil is shipped by sea. And insurance restrictions apply to these supplies. The price cap, which was led by the G-7 wealthy democraciesis intended to prevent the sudden loss of Russian oil to the world, which could lead to a new increase in energy prices. and other oil inflation.

U.S. Treasury Secretary Janet Yellen said in a statement that the deal would help limit Putin’s “primary source of revenue for his illegal war in Ukraine while at the same time protecting the world’s energy supply.” Maintain stability.”

The agreement comes after last-minute negotiations. Poland kept the EU treaty for a long time, seeking to set it as low as possible. After more than 24 hours of debate, when other EU countries indicated they would support the deal, Warsaw finally backed down late Friday.

A joint statement from the G-7 coalition issued on Friday said the group is ready to take into account market developments and the potential impact on the coalition’s members and low- and middle-income countries. Be prepared to review and adjust appropriate rates.”

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“Disrupting Russia’s energy revenues is at the core of blocking Russia’s war machine,” Estonian Prime Minister Kaja Kalas said. He added that he was happy to cut a few extra dollars from previous offers. She said every dollar was reduced to two billion dollars for Russia’s war chest.

“It’s no secret that we wanted the price to be lower,” Callas added, pointing to differences across the EU. “A price between $30-40 is what Russia will suffer significantly. However, this is the best compromise we can get.

The $60 figure sets a close cap on current Russian crude oil prices, which have recently fallen below $60 a barrel. Some argue that it is not low enough to reduce one of Russia’s main sources of income. That’s still a big discount to global 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.

There is a huge risk to the world market of losing large amounts of oil from the world’s number two producer. This can increase gas prices for drivers All over the world, which has caused a political crisis for US President Joe Biden And leaders in other countries. Europe is already facing an energy crisisWhile governments are facing protests due to the high cost of livingWhile developing countries are even more vulnerable to changes in energy costs.

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But the West is facing increasing pressure to target one of Russia’s main money makers – Oil – will reduce the funds flowing into Putin’s war chest and hurt the Russian economy Meanwhile, the war in Ukraine continues for the ninth month. Oil and natural gas prices have increased After demand rose from the pandemic and then the attack on Ukraine, energy markets were unsettled, which fed Russian coffers.

US National Security Council spokesman John Kirby told reporters on Friday that “the cap itself will have the desired effect of limiting Mr. Putin’s ability to profit from oil sales and limiting his ability to continue to use the money to fund their war machine.”

However, more uncertainty lies ahead. COVID-19 restrictions in China And a slower global economy means less thirst for oil. This is what prompted OPEC and allied oil-producing countries, including Russia, to cut world supply in October.. The OPEC+ alliance is scheduled to meet again on Sunday.

It competes with an EU ban that could take more oil supplies off the market, raising fears of supply pressures and higher prices. Russia exports about five million barrels of oil per day.

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

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Many insurers are based in the EU or UK and may be required to participate in a price cap.

Russia can also sell oil off the books using “black fleet” tankers with unknown ownership. Oil can be transferred from one ship to another and mixed with oil of similar quality to hide its origin.

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

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

“Since then, obviously oil prices have fallen and the global recession is a real thing,” he said. “The reality is that it is unlikely that oil prices will stay where they are now.”

European leaders pointed to their work on the price cap, which is Yellen’s mindset.

“The EU’s agreement on an oil price ceiling, in line with the G7 and others, will significantly reduce Russia’s revenues,” said Ursula van der Leyen, president of the European Commission, the EU’s executive arm. “This will help us stabilize global energy prices, and benefit developing economies around the world.”

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Caster reported from Brussels and McHugh from Frankfurt, Germany. AP reporter Amir Madani contributed from Washington.

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