The price applicable from Monday, equivalent to around €57 for 159 litres, would then be up to €9 below the most recent market price for Russian Urals grade crude. 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. The tanker fleet is predominantly owned by western shipping companies.
Von der Leyen convinced of success
EU Commission President Ursula von der Leyen said in the evening that the price cap coordinated with the group of major western industrialized nations (G-7) and others would “significantly reduce” Russia’s revenues. It will also help stabilize global energy prices, which will benefit emerging markets around the world.
The agreed maximum price is not low enough for Ukraine. It should fall by half to $30 a barrel, said President Volodymyr Zelenskyy’s chief of staff, Andriy Yermak: “It can destroy the enemy’s economy more quickly.”
Praise from Washington, Warning from Moscow
The US government welcomed the EU deal. “This is good news,” said National Security Council communications director John Kirby.
On the other hand, warnings and criticisms came from Russia. “The EU is putting its own energy security at risk,” prominent Russian foreign politician and State Duma deputy Leonid Slutsky was quoted as saying by state news agency TASS. And all to “satisfy the ambitions of partners abroad,” he said, referring to the United States.
debate
Ukraine: what’s next in winter?
periodic review
In order to be able to react to market developments, the plans provide for a bimonthly review of the price cap. It must always be at least five percent below an average price determined by the International Energy Agency (IEA). In addition to the EU, countries such as the USA, Great Britain, Canada, Japan and Australia are involved in the project.
The price cap is intended to complement the oil embargo against Russia that the EU decided in June. Among other things, this provides for a ban on the purchase, import or shipment of crude oil and certain petroleum products from Russia to the EU. Restrictions apply from December 5 for crude oil and from February 5, 2023 for other petroleum products. However, there are some exceptions, for example for Hungary.
Conflicting interests in the EU
Member states took the pivotal decision to introduce a price cap on Russian oil in October – after the G-7 had already launched a corresponding initiative.
Recently, however, negotiations on the specific price ceiling have proved more difficult than expected. During the negotiations, Poland, initially with the support of the Baltic countries, asked that a maximum price of less than US$ 30 per barrel be defined and, thus, remain at the estimated production costs of US$ 20 to US$ 40 per barrel. . The government in Warsaw was supported by Ukraine. President Volodymyr Zelenskyy said last week that a price of up to $30 would be possible.
Linked to another sanctions package
However, countries such as Greece and Malta were particularly opposed to such a low price cap. They fear that setting a price cap too low could bankrupt shipping companies based in their countries, because Russia may refuse to sell its crude oil at too low a price. Russia’s refusal to submit to the coercive regime could also trigger turmoil and price increases in international markets.
After the deal in Brussels, Estonia’s Prime Minister Kaja Kallas announced that part of the deal would also be the swift adoption of a ninth package of further sanctions against Russia. According to EU officials, there should already be new coordination negotiations at the weekend.