“It is not a serious decision to set such an upper limit for Russian prices” because it is “comfortable” for Moscow, Zelenskyj said on Saturday. The market price of Russian Urals oil is currently around $65 per barrel, with the price cap capping at $60.
“Russia has already inflicted enormous losses on all countries of the world by deliberately destabilizing the energy market,” Zelenskyy said in his evening video address. The decision for a price cap is therefore “a weak position”. It was “only a matter of time before heavier instruments would have to be used anyway,” added Selenskyj. “It’s a shame that time is wasted.”
A price cap of $60 per barrel of oil would still enable Russia to generate around $100 billion a year, Zelensky said. “This money will also be used to further destabilize the very countries that are now trying to avoid far-reaching decisions.”
In order to “destroy” the economy of the Russian enemy more quickly, it is necessary to reduce the price to $30, said the head of the Ukrainian presidential office Andriy Yermak earlier. At the same time he welcomed the move. Russia sees this as a violation of the laws of the free market.
After long and difficult negotiations, the EU countries had previously agreed on a price cap for Russian oil, and the G7 and Australia followed suit. The states want to force Russia to sell oil below the market price to buyers in other states in the future. The aim is to dry up the Kremlin’s war chest.
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The agreement reached on Friday provides for an initial price cap of USD 60 per barrel. The price of around EUR 57 per 159 liters would then be up to EUR 9 below the most recent market price for Russian Urals crude oil. According to the plans, it will apply from Monday. The G7 includes the US, Canada, France, Germany, the UK, Italy and Japan. Germany currently chairs the group.
Expert: Price cap hits Russian war chest hard
According to the energy economist Claudia Kemfert from the German Institute for Economic Research (DIW), the oil price cap would definitely hit Russia’s war chest. “It will hit Russia hard, the income will no longer be as plentiful,” she said on Deutschlandfunk on Saturday. One shouldn’t forget: “Russia has now earned gigantic sums of money this year from the high prices for fossil energy overall, including oil.” The only question is “whether it works the way you thought it would and how the world market ultimately reacts”.
This is how the lid is supposed to work
In order to enforce the price cap, it should be regulated that in future important services for Russian oil exports may only be provided with impunity if the price of the exported oil does not exceed the price cap. Western shipping companies could use their ships to continue transporting Russian oil to third countries such as India. The regulation should also apply to other important services such as insurance, technical assistance and financing and brokerage services.
US Treasury Secretary Janet Yellen hailed the price cap as the result of months of effort by the states involved. “Together, the G7, the European Union and Australia have now placed a price cap on Russian oil that will help us achieve our goal of capping Putin’s primary source of revenue from his illegal war in Ukraine, while preserving global energy stability.” , she said, referring to Russian President Vladimir Putin.
On the other hand, warnings and criticism came from Russia. “We will not accept this cap,” President Vladimir Putin’s spokesman Dmitry Peskov said, according to TASS agency. Russia is prepared for the price cap, will now quickly analyze the situation and then comment on concrete steps.
The price cap is intended to complement the oil embargo against Russia that the EU decided in June. Among other things, this provides for a ban on the purchase, import or forwarding of crude oil and certain petroleum products from Russia to the EU. The restrictions apply from December 5 for crude oil and from February 5, 2023 for other petroleum products. However, there are some exceptions, for example for Hungary.
The member states had taken the fundamental decision to introduce the price cap for Russian oil in October – after the G7 had previously launched a corresponding initiative.
Source: Nachrichten
