The idea of applying the G7 cap is to prohibit shipping, insurance and reinsurance companies from handling cargoes of Russian crude around the world, unless it sells for less than the price set by the G7 and its allies. .
With the world’s top shipping and insurance companies based in G7 countries, the price cap would make it extremely difficult for Moscow to sell oil at a higher price.
Polandwho had pushed for the limit to be as low as possible, you still have to respond if you accept the agreementwhich must be approved by all EU governments in a written procedure before Friday, the diplomat said.
The G7’s initial proposal last week was for a price cap of $65-70 a barrel with no adjustment mechanism.
Since Russian crude URL-E was already trading below that value, Poland, Lithuania and Estonia rejected that level, saying it fell short of the main goal of cutting Moscow’s revenues and its ability to finance its war in Ukraine.
“The maximum price was set at $60 with a provision to keep it 5% below the market price of Russian crude, according to IEA figures”said the EU diplomat. Reviews of the maximum price level would be made every two months, they added.
Polish diplomats said that consultations with Warsaw were ongoing. In turn, Lithuania and Estonia, which had seconded pressure from Poland to set the ceiling as low as possible, also agreed to the US$60 limit. Russian URL-E crude was trading at $70.3 a barrel this afternoon.
G7 price cap for Russian seaborne crude to take effect on December 5replacing the EU’s stricter ban on buying Russian crude by sea, as a way of safeguarding the world’s oil supply, since Russia produces 10% of the world’s oil.
Source: Ambito
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