G7 coalition agrees $60 per barrel price cap for Russian oil

BRUSSELS/WASHINGTON:

The Group of Seven (G7) nations and Australia said they had agreed a $60 per barrel price cap on Russian seaborne crude oil after European Union members overcame resistance from Poland and hammered out a political agreement earlier in the day.

The EU agreed the price after holdout Poland gave its support, paving the way for formal approval over the weekend.

The G7 and Australia said in a statement the price cap would take effect on December 5 or very soon thereafter.

The nations said they anticipated that any revision of the price would include a form of grandfathering to allow compliant transactions concluded before the change.

“The Price Cap Coalition may also consider further action to ensure the effectiveness of the price cap,” the statement read. No details were immediately available on what further actions could be taken.

The price cap, a G7 idea, aims to reduce Russia’s income from selling oil, while preventing a spike in global oil prices after an EU embargo on Russian crude takes effect on December 5.

Warsaw had resisted the proposed level as it examined an adjustment mechanism to keep the cap below the market price. It had pushed in EU negotiations for the cap to be as low as possible to squeeze revenues to Russia and limit Moscow’s ability to finance its war in Ukraine.

Polish Ambassador to the EU Andrzej Sados on Friday told reporters Poland had backed the EU deal, which included a mechanism to keep the oil price cap at least 5% below the market rate. US officials said the deal was unprecedented and demonstrated the resolve of the coalition opposing Russia’s war.

A spokesperson for the Czech Republic, which holds the rotating EU presidency and oversees the EU countries’ negotiations, said it had launched the written procedure for all 27 EU countries to formally greenlight the deal, following Poland’s approval.

Details of the deal are due to be published in the EU legal journal on Sunday.

European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenues.

Russian Urals crude traded at around $67 a barrel on Friday.

Published in The Express Tribune, December 4^th, 2022.

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