Ukraine war: G7, EU, Australia agree on $60 per barrel cap on Russian crude oil

2 hours ago

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Countries participating in the measure will not be able to buy Russian crude oil at a price higher than $60 per barrel.

Following the European Union (EU), seven major countries (G7) and Australia have also agreed on the cap on Russian crude oil.

On the 2nd (local time), the G7 and Australia issued a joint statement announcing that they would implement the cap on Russian crude oil as early as the 5th.

The EU, including Poland, previously agreed to set the cap.

Under the cap, countries cannot buy Russian crude oil at a price higher than $60 a barrel.

Poland expressed its willingness to participate on the 2nd after receiving a guarantee that the upper limit would be maintained at 5% below the market price.

The price ceiling was proposed by the G7 countries in September. This is to prevent a situation where Russia benefits from crude oil exports without being affected by rising crude oil prices.

The EU wanted to set the upper limit at 65 to 70 dollars, but Poland, Lithuania and Estonia are said to oppose it, saying the price is too high.

Poland wanted the cap to be as low as possible and delayed participation in revising a mechanism to adjust the cap to market prices whenever crude oil prices fluctuated.

As of the 2nd, crude oil from Russia’s Urals was trading at $64 a barrel.

According to the joint statement, the purpose of introducing the price cap is to “prevent Russia from benefiting from a war of aggression in Ukraine”.

The move aims to “stabilize global energy markets and reduce the negative economic implications of the war, particularly in low- and middle-income countries that have been disproportionately affected by the war of Russian aggression,” he said.

Previously, the EU announced that it would also come into force on the 5th of a ban on the import of crude oil from Russia.

The price cap applies to all crude oil imports worldwide, and is interpreted to complement the previous measures.

Ukraine’s Western allies plan to ban shipping insurance from tankers carrying Russian crude to countries that do not comply with the price cap, effectively making it difficult for Russia to sell crude above the cap.

White House National Security Council (NSC) spokesman John Kirby welcomed the news of the EU deal on Monday and said the move would slow Russian President Vladimir Putin’s “weapons of war”.

Russia condemned the move and said it would not supply crude oil to countries with caps.

According to the International Energy Agency (IEA), Russia exported more than half of its oil to Europe last year, before the war started in Ukraine. Of these, Germany was the largest importer, followed by the Netherlands and Poland.

But after the start of the war in Ukraine, EU countries are desperately trying to reduce their dependence on Russian oil. The US has already banned the import of crude oil from Russia, and the UK is phasing it out by the end of the year.

Russia will certainly suffer from this measure, but it seems that the impact can be minimized by continuing to do business with India and China, who are currently the biggest buyers of Russian crude oil.

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