EU Temporarily Agrees to Price Cap of $60 on Russian Seaborne Oil

The European Union has temporarily approved a barrel price cap of $60 on Russian seaborne oil. This comes from a proposal of the Group of Seven (G7) nations. The agreement also contains an adjustment mechanism to maintain the cap at 5% below the market price.

The proposed agreement is pending approval from all EU governments by this Friday. EU countries have been discussing the details of the price cap, which is targeted toward cutting Russia’s income from selling oil and blocking global oil price spikes after the EU’s embargo on Russian oil is implemented on December 5.

This would permit countries to continue importing oil from Russia with Western insurance and maritime services with the guaranteed agreement of not paying more per barrel than the set limit.

Originally, the G7 proposal was set at $65-70 per barrel with no adjustment mechanism.

According to an EU official, the G7 officials have been closely following oil markets in the period of development following the price cap mechanism and seemed “pretty comfortable” with it.

With Russian Ural crude being traded at slashed prices, Estonia, Lithuania, and Poland have already rejected the higher $65-70 per barrel price, citing the failure to lessen Russia’s capability to finance its war in Ukraine.

“The price cap is set at $60 with a provision to keep it 5 percent below market price for Russian crude, based on IEA figures,”  mentioned an EU diplomat.

An EU document specified that the price cap would be reassessed come January and every two months afterward to see if the plan is functioning and to address any future “turbulences” that can occur.

Source: Inquirer