EU, G7 and Australia agreed on a ceiling price for Russian oil

The “Big Seven” countries (the USA, Japan, Germany, Great Britain, France, Italy, Canada) and Australia, following the EU, introduced a price limit for oil delivered by sea from the Russian Federation at the level of $60 per barrel. This is reported by the US Treasury on its website.

Details and comments

As noted in the message, the main purpose of such a step is to limit the Kremlin’s income to finance the war in Ukraine. “With Russia’s economy already shrinking and its budget increasingly depleted, the price cap will cut into Putin’s most important source of income,” Treasury Secretary Janet L. Yellen said.

According to her, the agreement will also help stabilize global energy prices. “The price cap will particularly benefit low- and middle-income countries, which have already borne the brunt of rising energy and food prices exacerbated by Putin’s war. Whether these countries buy energy within or outside the cap, the cap will allow them to trade greater discounts on Russian oil and benefit from greater stability in global energy markets,” the US Treasury Secretary noted.

It is known that the limit price for oil from Russia will be revised every two months so that it is lower than the market price by 5%. Negotiations on the price cap in Brussels were controversial and lasted more than a week. Poland and the Baltic countries did not agree to a too high price, as they argued that it would not have an effect.

As Radio Svoboda journalist Rikard Jozwiak reported on Twitter, the prime minister of Estonia Kaia Kalas, who managed to lower the price to $60 after negotiations with the prime minister, contributed most to the deal – Minister of Greece Kyriakos Mitsotakis.

Ukrainian President’s office reacted to the Western partners’ decision

“The G7 and Australia followed the EU in introducing a cap on the price of oil shipped by sea from the Russian Federation at $60 per barrel. Everything that the McFaul-Yermak group proposed, although it would be necessary to lower it to $30 to destroy the economy faster enemy. We always achieve our goal and Russia’s economy will still be destroyed, and Russia itself will pay and be responsible for all crimes. It will be the same with the tribunal. They are very afraid of this, because they know that Ukraine will get its way,” the head of the President’s Office Andriy Ermak wrote in Telegram.

As a reminder, the ban on exporting Russian oil to Europe by sea comes into force on December 5. And from February 5, 2023, the supply of Russian oil products to the EU will be stopped.

In the past, Russian President Vladimir Putin and several other officials have repeatedly said that the country will not supply oil to those who join the price cap. Deputy Prime Minister Aleksandr Novak announced that the Russian Federation would redirect supplies to “market-oriented partners” or reduce production.

Bloomberg, citing its own sources, writes that the Kremlin is already drafting a presidential decree that will prohibit Russian companies and any traders who trade in Russian oil from selling it to countries or market participants that will join the price capping mechanism.