EU members have agreed on the introduction of a price cap for the oil that Russia exports by sea. The EU will set the upper limit for the price of this oil at 60 dollars for a 159-liter barrel. The measure is expected to immediately reduce the main source of income for Russia.
The measure is expected to be officially approved this weekend. The EU reached the agreement after Poland was also convinced of it. It announced its support after assurances that the cap would be five percent lower than the market price, reports the BBC.
The EU wanted to set the price cap at 65-70 dollars, but Poland, Lithuania and Estonia rejected this amount as too high.
At the same time, Ukraine’s Western allies will deny insurance to tankers transporting Russian oil to countries that do not comply with the mentioned price cap. This will make it difficult for Russia to sell oil above this price.
US Treasury Secretary Janet Yellen she said that the Russian economy is already shrinking, Russia is short of funds, and there will be a price cap “immediately cut into Putin’s most important source of income”.
According to her, the measure will mean new pressure on the Russian president’s finances Vladimir Putin and “restricted the revenue he uses to finance his brutal invasion”, at the same time, it is not expected to affect the supply chain around the world, which could lead to a spike in fuel prices around the world.
Russia criticized the EU agreement. As she announced, she will not supply oil to countries that will enforce the price cap.
In response, Moscow announced that the Union was thereby endangering its energy security. On Monday, the six-month transition period will end after the European package of sanctions adopted in June, which prohibits the purchase, import and transport of crude oil and certain oil derivatives from Russia to the Union.
Crude oil delivered via pipelines will continue to be subject to a temporary exemption, including for Hungary and Slovakia. The embargo on petroleum products will come into effect in two months.
Along with the EU, also the G7
According to the EU, the G7 group officially decided on Friday evening to set an upper limit for the price of Russian oil at $60 per 159-liter barrel.
At the same time, the members of the group reiterated that with this measure they are realizing their commitment to be “They prevented Russia from making profits at the expense of the war of aggression in Ukraine, supported stability in the world energy markets and minimized the negative economic consequences of the Russian war of aggression”.
Australia also joined the agreement on the price cap for Russian oil, which was reached in principle by the G7 countries and the EU in September.
The actions of the West will certainly hurt Russia, but it mitigates this damage by selling oil to countries like India and China. These two countries are currently the largest single buyers of Russian crude oil.
Before the war in Ukraine, in 2021, Russia exported more than half of its oil to European countries. The largest importer was Germany, followed by the Netherlands and Poland. After the start of the war, the EU wants to reduce its dependence on Russian energy sources. Meanwhile, the US has already banned imports of Russian crude, and the UK plans to do so gradually by the end of the year.