“Russia has already inflicted enormous losses on every country in the world by deliberately destabilizing the energy market,” Zelenskyy said in his evening video address. The decision for a price cap is therefore “a weak position”. It was “only a matter of time before heavier instruments had to be used anyway”, added Zelenskyy. “It is a pity that time is wasted.”
A price cap of $60 per barrel of oil would still allow Russia to generate about $100 billion a year, Zelensky said. “That money will also be used to further destabilize the very countries that are now trying to avoid far-reaching decisions.”
In order to “destroy” the economy of the Russian enemy more quickly, it is necessary to reduce the price to $30, the head of the Ukrainian presidential office Andriy Yermak said on Saturday. At the same time, he welcomed the change. Russia sees this as a violation of free market laws.
After long and difficult negotiations, EU countries had previously agreed to a price cap on Russian oil, and the G7 and Australia followed suit. The states want to force Russia to sell oil below the market price to buyers in other states in the future. The aim is to dry the Kremlin’s war chest.
The agreement reached on Friday provides for an initial price ceiling of US$ 60 per barrel. The price of around €57 for 159 liters would be up to €9 below the latest market price for Russian Urals crude. According to the plans, it will be applied from Monday. The G7 includes the US, Canada, France, Germany, UK, Italy and Japan. Germany currently chairs the group.
According to energy economist Claudia Kemfert of the German Institute for Economic Research (DIW), the oil price ceiling would hit Russia’s war chest hard. “This will hit Russia hard, income will no longer be as plentiful,” she said at Deutschlandfunk on Saturday. One should not forget: “Russia has made huge sums of money this year from high prices for fossil energy in general, including oil.” The only question is “whether it works the way you thought it would and how the world market finally reacts”.
In order to enforce the price cap, it should be regulated that, in the future, important services for Russia’s oil exports can only be provided with impunity if the price of the exported oil does not exceed the price cap. Western shipping companies could use their ships to continue transporting Russian oil to third countries such as India. The regulation should also apply to other important services such as insurance, technical assistance and financing and brokerage services.
US Treasury Secretary Janet Yellen praised the price cap as a result of months of efforts by the states involved. “Together, the G7, the European Union and Australia have set a price cap on Russian oil that will help us achieve our goal of limiting Putin’s primary revenue stream for his illegal war in Ukraine while preserving global energy stability.” , she said. , referring to Russian President Vladimir Putin.
On the other hand, warnings and criticisms came from Russia. “We will not accept this limit,” President Vladimir Putin’s spokesman Dmitry Peskov was quoted as saying by the TASS news agency. Russia is prepared for the price cap, will now quickly analyze the situation and then comment on concrete measures.
The price cap is meant to complement the oil embargo against Russia that the EU decided in June. Among other things, it provides for a ban on the purchase, import or shipment of crude oil and certain petroleum products from Russia to the EU. Restrictions apply from December 5 for crude oil and from February 5, 2023 for other petroleum products. However, there are some exceptions, for example for Hungary.
Member states took the key decision to introduce the Russian oil price cap in October – after the G7 had already launched a corresponding initiative.