The EU has agreed on Friday a measure of great importance to increase the pressure of sanctions on Russia and clamp down on the income with which the Kremlin feeds the war in Ukraine. The 27 member states have agreed to a cap of $60 per barrel of Russian oil that Moscow sells by sea (approximately two-thirds of the total it exports to Europe). The measure, which does not affect the product that is transported through the pipeline and which develops what was agreed by the G-7, the group of the richest countries in the world, is part of one of the sanctions packages against Moscow and also establishes a mechanism to review that cap every six months with the aim of keeping it below 5% of the market price, according to European sources. The agreed price, however, exceeds the level at which Russia sells most of its crude, in an attempt to keep oil flowing on world markets and the Kremlin to feel the effect, but not turn off the tap to Europe.
Also, in recent months, Russia has been selling its crude cheap. The Kremlin has assured that the cap on the price of Russian oil is “irrelevant”, but has also stated that it will not sell to whoever adopts that cap. The G-7 countries—Germany, France, the United Kingdom, Italy, Japan, Canada, and the United States—are considering a maximum price of between $65 and $70 per barrel (without adjustment mechanism).
The Twenty-seven have been working for weeks to seal an agreement that would fix the price of Russian crude in global purchases and thus reduce the income that the Kremlin obtains from the sale of fossil fuels. The agreement has come after first the Baltic countries and then Poland, which proposed a more ambitious proposal with a much lower price per barrel, agreed to set it at $60 a barrel, but with the condition of adding additional requirements to review that price. every two months, according to diplomatic sources. The representatives of Warsaw have consulted the agreement in depth and have ended up giving it the green light this Friday.
The EU reaches the agreement shortly before the deadline of December 5, when the embargo on Russian crude arriving by sea in the EU must come into force. The measure aims to get more countries to join the initiative, but also, following the requests of the countries with the most interests in the shipping sector, it will allow them to continue importing Russian crude and selling it using insurance and Western maritime services, as long as they do not pay more per barrel. than the agreed limit. The main global insurers and transport companies are based in G-7 countries and the EU, so the new price limit measure will make it very difficult for Russia to sell its crude at a higher price. Importers seeking shipping services and insurance coverage from Western-based companies to transport Russian crude will have to abide by that price cap.
The maximum price will allow oil to continue flowing to buyers in India, China or Turkey, for example. But it was also about achieving an adjusted price to reduce the income of the Kremlin and, at the same time, to continue selling. The United States and other voices had expressed concern about the possibility that the Kremlin would shut down sales, cut production and push up global oil prices.
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