EU member states have agreed to implement a $60 cap on global Russian oil purchases after Poland dropped its objections to a long-running dispute to save the Kremlin’s fossil-fuel revenues.
Warsaw delayed the deal on capital after demanding a lower ceiling to further erode Moscow’s income. His support means the bloc will implement a ban on Russian offshore oil entering the EU before December 5.
The cap, which is set to be approved by the G7 countries and some allies, is designed to divert Russian oil to countries like India and China, but has less leverage than Moscow.
Intended to have global reach, Russian oil importers will have to monitor price ceilings, relying on insurance coverage and shipping services from companies in the EU and other G7 countries.
However, Russia has stated that it will not sell oil to any of the countries involved in the Cape, and India and China have not yet indicated that they will do so. Russia is expected to rely on tankers ready to operate without Western insurance, although traders say exports could be cut if they cannot find enough ships.
Russian oil is already trading at a steep discount to global benchmark Brent.
Andrzej Sadosh, Poland’s permanent representative to the European Union, said: “We can officially agree on the resolution,” adding that the official publication of the law will probably take place at the end of the week.
The deal follows months of negotiations.
US Treasury Secretary Janet Yellen, one of the driving forces behind this year’s rate hike, welcomed the deal and thanked Washington’s allies in the European Union, saying “Putin will help us reach our goal of limiting the main source of revenue from illegal war.” At the same time, Ukraine maintains the stability of international energy supplies.
It is $70 less than the price originally proposed by the European Commission following requests from Poland and other member states to lower the price. On Friday, benchmark Brent crude was trading at $86.
Warsaw’s recognition came after Brussels agreed to speed up work on a new package of sanctions against Moscow that would include measures planned by Poland. “We want to be absolutely sure. . . We are working on a new, painful, expensive, sanctions package for Russia,” Sados said.
The capital agreement includes a provision that the ceiling will be periodically reviewed to ensure that it is “at least 5 percent” below the average market price for Russian oil.
The price reform initiative is supported by the US, which is keen to ensure that Russian oil exports continue to avoid global shortages that could lead to a rise in crude prices. The United States hopes that India and China can still use the existence of a price ceiling to negotiate higher concessions.
He said the new price reform would particularly benefit low- and middle-income countries “already bearing the brunt” of energy and food inflation caused by Russia’s invasion.
“These countries will be able to buy energy from and outside of the cap, the COP will allow them to offer significant discounts on Russian oil and benefit from the stability of the international energy market,” she said in a statement.
Some EU states had initially called for a price level of up to $30, but Brussels officials feared this would reduce Moscow’s exports.
A senior Treasury official has played down the possibility that Russia will offer its own insurance and services to exporters to quickly escape inflation.
“If Russia spends money to build its own [shipping and insurance] The ecosystem that is helping us. . . “Our first goal is because they will have money to fight their war in Ukraine,” the official said.
The country’s Ministry of Finance announced that oil and gas flows could account for 42 percent of Russia’s revenue this year.
Additional reporting by David Sheppard and Derek Brower