Brussels November 30 2022: European Union states are discussing capping the price of Russian crude oil at $60 a barrel to help secure an agreement among the bloc’s wider membership and the broader Group of Seven, according to people familiar with the matter.
EU talks on the level at which to cap Russian oil have been stuck since last week. Poland and the Baltic nations have demanded a price that puts more pressure on Moscow’s revenues, arguing that current proposals -- which have gone as low as $62 -- are too generous. Greece and other shipping countries have angled for a higher price.
It’s not clear whether all the nations in the two groups are open to $60 but most are if the level is coupled with other demands being met, the people said, adding that discussions are still ongoing.
The new figure would still be slightly higher than where Russia’s flagship barrels now trade. The aim of the price cap -- first proposed by the US amid concern EU sanctions were too strict -- is to keep Russian oil flowing to avoid a global price spike, while also limiting Moscow’s revenue.
That means that if it’s to work, the level has to be attractive enough to the Kremlin. If it’s above the market rate, Russia and its buyers can argue it’s simply business as usual. The risk for oil markets is that if the cap is set too low, Moscow may make good on a threat to shut down production -- sending global oil prices higher.
The $60 figure has yet to be formally proposed and discussed by the bloc at large. EU ambassadors were meeting on Wednesday for a regularly planned weekly session but the cap isn’t on the formal agenda. Any agreement at EU level would require the backing of all member states, as well as the support of the G-7. One of the people said the $60 figure would fit within the G-7’s range.
Both sets of EU holdouts also want the cap to include a review mechanism. Greece has proposed holding one every two months from mid-January to evaluate market developments in a timely manner, another person said. Together with Malta and Cyprus, Athens has been seeking guarantees that the shipping industry won’t be discriminated against by international competitors as a result of the cap.
Poland and the Baltic countries have in parallel asked for firmer progress on a new package of EU sanctions. Clarity on those measures is expected over the next few days and the EU’s executive arm also presented this week proposals to tackle the circumvention of sanctions, use frozen assets and hold Russia accountable for its war of aggression against Ukraine.
G-7 countries are aiming to put the price cap in place before Monday, when wider EU sanctions on oil are due to come into force. The cap plan would ban shipping and services needed to transport Russian oil, such as brokering, financial assistance and insurance, unless the cargoes are purchased below the agreed price threshold.
Most G-7 nations will stop importing Russian crude later this year. Similar restrictions, including a price cap, for other petroleum products are due in February.