EU SEES SIGNIFICANT HIT TO RUSSIAN REVENUES
European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenues.
“It will help us stabilise global energy prices, benefiting emerging economies around the world,” von der Leyen said on Twitter, adding that the cap would be “adjustable over time” to react to market developments.
The G7 price cap will allow non-EU countries to continue importing seaborne Russian crude oil, but it will prohibit shipping, insurance and reinsurance companies from handling cargoes of Russian crude around the globe, unless it is sold for less than the price cap.
Because the most important shipping and insurance firms are based in G7 countries, the price cap would make it very difficult for Moscow to sell its oil for a higher price.
US Treasury Secretary Janet Yellen said the cap will particularly benefit low- and medium-income countries that have borne the brunt of high energy and food prices.
“With Russia’s economy already contracting and its budget increasingly stretched thin, the price cap will immediately cut into Putin’s most important source of revenue,” Yellen said in a statement.
A senior US Treasury Department official told reporters on Friday that the US$60 per barrel price cap on Russian seaborne crude oil will keep global markets well supplied while “institutionalising” discounts created by the threat of such a limit.
The chair of the Russian lower house’s foreign affairs committee told Tass news agency on Friday the European Union was jeopardising its own energy security.
The initial G7 proposal last week was for a price cap of US$65-US$70 per barrel with no adjustment mechanism. Since Russian Urals crude already traded lower, Poland, Lithuania and Estonia pushed for a lower price.
Russian Urals crude traded at around US$67 a barrel on Friday.
EU countries have wrangled 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 after that, according to diplomats and an EU document seen by Reuters on Thursday.
The document also said a 45-day transitional period would apply to vessels carrying Russian crude that was loaded before Dec 5 and unloaded at its final destination by Jan 19, 2023.
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