Europe, America and Australia set a price limit of $60 per barrel for Russian oil Experts: It is difficult to be effective and the current price is much lower than this| Blog post

December 03, 2022 11:50 Last updated: 15:27

The EU agreed to cap the price of imported Russian sea oil at $60 a barrel. The Group of Seven Industrialized Countries (G7) and Australia announced that they would set a price ceiling for Russian oil in accordance with the agreement that has just been passed by the European Union.

The Wall Street Journal believes that the West wants to use the “power” of the EU in the insurance mechanism and the shipping industry to set a price ceiling for Rosneft. According to the mechanism, companies transporting Russian oil outside Europe must set the price of oil products below US$60 per barrel, otherwise they will not be able to obtain relevant insurance and intermediary services. According to reports, EU and British companies provide financing, insurance and intermediary services for around 90% of the world’s ships.

US Under-Secretary of the Treasury Adeyemo said on Thursday that the US supports a review of the price cap every two months. As Poland is dissatisfied with the price ceiling being too high, the European Commission presented on Thursday a new document to win the support of Poland. The document promises that starting next January, the price ceiling will be reviewed every two months and the price ceiling will be kept at least 5% below the export price of Russian crude oil.

US Treasury Secretary Yellen.  AP photos.

US Treasury Secretary Yellen. AP photos.

Janet Yellen, Secretary of the US Treasury, said that the Russian economy has shrunk and its budget has become increasingly tight. The cap on oil prices will immediately cut Putin’s most important source of income. Reuters quoted a senior US Treasury Department official as saying the price cap would force Russia to sell oil at a discount and institutionalize it, cutting oil revenues and the Putin regime’s ability to finance the war in Ukraine.

However, not all parties are optimistic about the move to limit the price of Russian oil in Europe, America and Australia.

Argus Media, a commodity market price assessment agency, said the measures were unlikely to be effective, for example, the price of Russian Urals crude oil exported from the Baltic port of Primorsk on Wednesday was $48 a barrel, well below the ceiling a price set by the West.

Shen En, an analyst at the research firm Asoects, also believes that no matter how the price ceiling is designed, Russia will find buyers outside the EU. Most do not of Asian buyers who undertake Russian oil have participated in the Russian oil price ceiling set by the Oil market participants can also provide insurance or financial services to Rosneft.

“Reuters” quoted unnamed US officials as saying that there are downsides to setting fixed prices. For example, the periodic review and price revision procedures inevitably involve more bureaucratic meetings.

Russian President Vladimir Putin.  AP photos.

Russian President Vladimir Putin. AP photos.

It is worth noting that as early as September, Russian Deputy Prime Minister Novakto, who was responsible for energy management, criticized the West’s price cap behavior as completely absurd, which not only leads to instability in the oil market and scarcity. supply, but also has the opportunity to lead to a decline in investment in the oil industry as a whole, leading to a global energy security disaster. He emphasized that Russia will not supply oil and oil products to countries that support price caps.

On October 12, Russian President Vladimir Putin attended the “Russian Energy Week” forum and reiterated that measures such as capping energy prices against Russia are “cunning tricks” and “shameless blackmail.” Russia will not go against common sense, let alone supply energy to countries that limit prices.

Putin described an artificial price cap that would trigger global energy shortages and price increases that would hit the poorest countries first. At the moment, modern energy is facing unprecedented challenges due to the wrong actions of some Western countries over the years, and various professional and non-political forums should discuss this topic and find solutions.

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