G7 alliance has decided to impose a fixed price for Russian oil

The price of Russian oil will be set

Group of Seven rich countries and Australia have agreed to impose a fixed price when they finalize a price limit on Russian oil later this month, rather than a variable rate.

In recent weeks, US officials and G7 countries have been in intense negotiations over an unprecedented plan to impose a price cap on sea-borne oil shipments, which is set to go into effect on December 5 – to ensure that EU and US sanctions aimed at limiting Moscow’s ability to fund its invasion of Ukraine do not suffocate the global oil market.

“Rather than a discount to an index, the Coalition has decided that the price ceiling would be a set price that will be evaluated on a regular basis.” “According to a coalition source who was not allowed to talk publicly. “This will improve market stability and reduce compliance burdens on market players.”

The initial price has not been decided, but will be in the coming weeks, according to several sources. According to the source, coalition partners agreed to assess the set pricing on a regular basis and alter it as needed.

Also the coalition was concerned that a floating price set below the Brent international benchmark would allow Russian President Vladimir Putin to cheat the system by decreasing supplies.

Putin might gain from a floating pricing system since the price of his country’s oil would climb if Brent rose owing to a drop in oil production from Russia, one of the world’s top producers. The disadvantage of the agreed-upon fixed-price method is that it would necessitate additional coalition and bureaucracy meetings to evaluate it on a regular basis, according to the source.

US Treasury Secretary Janet Yellen and other G7 officials contend that the price ceiling, which is planned to begin on crude on December 5 and on oil products on February 5, will constrain funds to Russia without reducing supplies to consumers. Russia has stated that it will refuse to ship oil to nations that impose price controls.

Shipping companies are keen to learn more about the G7 proposal, which is set to go into force in a month.

A consistent price cap might allow insurers to roll over contracts and commence new ones with greater confidence, without danger of the price being altered by nations importing Russian oil, thus exposing insurers to penalties.

There was no quick response from Treasury or coalition members’ embassies, which include the G7 affluent nations, the European Union, and Australia.

The Wall Street Journal reported on Friday that the US and its allies have agreed on further specifics of which Russian oil supplies will be subject to the price restriction.

According to the governments, each consignment of seaborne Russian oil will be subject to the price cap only when it is first sold to a customer on land. Reuters was unable to quickly confirm the allegation, which cited people familiar with the situation.