- Yellen praises months of “hard work” to reach an agreement
- Price cap hits Russia’s main source of income – Yellen
- Poland supports the price cap after requesting additional conditions
- The G7 price cap aims to reduce Russia’s oil revenues
WASHINGTON/BRUSSELS, Dec. 2 (Portal) – The Group of Seven (G7) nations and Australia announced on Friday that they had agreed on a price cap of $60 a barrel for Russian sea crude after European Union members overcame opposition from Poland and a political agreement had been reached earlier in the day.
The EU agreed on the price after the refused Poland gave its support, paving the way for formal approval over the weekend.
The G7 and Australia said in a statement that the price cap would come into effect on December 5 or very soon after.
Nations said they expected any change in price would include some form of grandfathering to allow for compliant transactions completed before the change.
“The Price Cap Coalition may also consider other actions to ensure the effectiveness of the price cap,” the statement said. No details were initially available about what further action could be taken.
The price cap, a G7 idea, aims to reduce Russia’s oil revenues while preventing a surge in global oil prices after an EU embargo on Russian crude comes into effect on December 5.
Warsaw had resisted the proposed level as it was considering an adjustment mechanism to keep the cap below the market rate. She had urged the EU negotiations to keep the cap as low as possible to squeeze revenue to Russia and limit Moscow’s ability to fund its war in Ukraine.
Polish Ambassador to the EU Andrzej Sados told reporters on Friday that Poland supported the EU deal, which included a mechanism to keep the oil price cap at least 5% below the market price. US officials said the deal was unprecedented and showed the coalition’s determination to oppose Russia’s war.
A spokesman for the Czech Republic, which holds the EU’s rotating presidency and oversees EU countries’ negotiations, said it had launched the written procedure for all 27 EU countries to formally greenlight the deal following Poland’s approval.
Details of the deal are set to be published in the EU Legal Journal on Sunday.
The EU sees significant losses in Russian revenue
European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenues.
“It will help us stabilize global energy prices, which will benefit emerging markets around the world,” von der Leyen said on Twitter, adding that the cap could be “adjusted over time” to respond to market developments .
The G7 price cap will allow non-EU countries to continue importing Russian crude by sea, but it will ban shipping, insurance and reinsurance companies from handling cargoes of Russian crude around the globe unless they will sold for less than the price cap.
With the main shipping and insurance companies based in G7 countries, the price cap would make it very difficult for Moscow to sell its oil at a higher price.
US Treasury Secretary Janet Yellen said the cap would particularly benefit low- and middle-income countries, which are bearing the brunt of high energy and food prices.
“With Russia’s economy already shrinking and its budget tightening, the price cap will immediately hit Putin’s main source of income,” Yellen said in a statement.
A senior US Treasury Department official told reporters on Friday that the $60-a-barrel price cap for Russian sea crude will feed global markets well, while “institutionalizing” rebates created by the threat of such a cap.
The head of the foreign affairs committee of Russia’s lower house told the TASS news agency on Friday that the European Union is endangering its own energy security.
The initial G7 proposal last week called for a price cap of $65-$70 a barrel with no adjustment mechanism. With Russian Ural crude already trading lower, Poland, Lithuania and Estonia pushed for a lower price.
Russian Ural crude was trading at around $67 a barrel on Friday.
EU countries have been bickering for days over the details, with those countries adding conditions to the deal – including that the price cap will be reviewed in mid-January and every two months thereafter, according to diplomats and an EU document Portal reported on Thursday was presented.
The document also said a 45-day transition period would apply to ships carrying Russian crude oil loaded before December 5 and unloaded at its final destination by January 19, 2023.
Reporting by Jan Strupczewski and Kate Abnett in Brussels and David Lawder, Andrea Shalal and Daphne Psaledakis in Washington; Edited by Geert De Clercq, Philippa Fletcher, Barbara Lewis, Alistair Bell and Daniel Wallis
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