G-7 joins EU in $60-per-barrel price ceiling on Russian oil

WASHINGTON (AP) — The Group of Seven nations and Australia joined the European Union on Friday in agreeing to a $60-a-barrel cap on Russian oil, a key step in Western sanctions aimed at rebalancing the world oil market. Stop inflation and starve President Vladimir Putin of financing the war in Ukraine..

Europe must set the discounted price that other countries will pay by Monday, when the EU imposed a ban on Russian oil shipped by sea. And the ban on insurance for those products will come into effect. A price ceiling led by the G-7 rich democraciesThe aim is to prevent a sudden loss of Russian oil to the world that could lead to a new surge in energy prices Also fuel inflation.

US Treasury Secretary Janet Yellen said in a statement that the deal would help Putin “control the primary source of revenue for his illegal war in Ukraine while protecting the stability of global energy supplies.”

The agreement was reached after tense last-minute negotiations. Poland has long held an EU treaty. After more than 24 hours of discussions, Warsaw finally relented late Friday when other EU countries signaled they would support the deal.

A joint G-7 alliance statement released on Friday said the group “stands ready to review and adjust the maximum price” taking into account market developments and potential impacts on alliance members and low- and middle-income countries.

“Freezing Russia’s energy revenues is at the heart of stopping Russia’s war machine,” said Estonian Prime Minister Kaja Kallas, who said he was glad to see some extra dollars dropped from earlier plans. He said the cap was cut by $2 billion less for every dollar spent on Russia’s war chest.

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“It’s no secret that we want prices to be lower,” Kalas added, highlighting differences within the EU. “A price between 30-40 dollars will significantly affect Russia. However, this is the best compromise we can get.

The $60 figure is close to the current price of Russian crude oil, which recently fell below $60 a barrel. Some criticize it for not being low enough to cut one of Russia’s main sources of income. That’s still a big discount to international benchmark Brent, which fell to $85.48 a barrel on Friday, but would be too much for Moscow to sell even if it rejects the idea of ​​a cap.

A major risk to the global oil market is losing large amounts of crude oil from the world’s No. 2 producer. This could increase petrol prices for drivers Globally, this has caused political turmoil for US President Joe Biden and other heads of state. Europe is already in an energy crisisGovernments face protests against the rising cost of livingDeveloping countries are more vulnerable to changes in energy costs.

But the West has faced increasing pressure to target one of Russia’s main moneymakers – Oil – to hurt Russia’s economy by reducing funds flowing into Putin’s war chest The war in Ukraine drags on for the ninth month. Oil and natural gas prices increased After demand recovered from the pandemic, the invasion of Ukraine fed volatile energy markets, feeding Russia’s coffers.

US National Security Council spokesman John Kirby told reporters on Friday that “the cap will have the desired effect of limiting Mr. Putin’s ability to profit from oil sales and then use that money to finance his war machine.”

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However, there is still uncertainty. Covid-19 restrictions in China And a slowing global economy will reduce the appetite for oil. OPEC and the Organization of the Petroleum Exporting Countries, including Russia, hinted at cutting world supply in October.. OPEC+ is set to meet again on Sunday.

It competes with an EU embargo that could take more oil supplies off the market, raising fears of a supply squeeze and higher prices. Russia exports about 5 million barrels of oil per day.

Putin has said he will not sell oil under price caps and will retaliate against countries that implement the measure. However, Russia has already shifted most of its supply to India and China and other Asian countries at discounted prices because Western customers avoided it before the EU ban.

Most insurers are based in the European Union or the United Kingdom and must participate in the price range.

Russia can also sell oil off the books using “dark navy” tankers with unclear ownership. Oil can be transferred from one vessel to another and mixed with oil of the same quality to disguise its appearance.

Even under those circumstances, it would make it “expensive, time-consuming and complicated” for Russia to sell oil around the restrictions, said sanctions expert Maria Shakina of the Institute for International Strategic Studies in Berlin.

Robin Brooks, chief economist at the Institute of International Finance in Washington, said the price cap should have been implemented this summer when oil was around $120 a barrel..

“Since then, obviously oil prices have fallen and the global recession is a real thing,” he said. “The reality is that it’s unlikely to stick with where oil prices are right now.”

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European leaders touted their work on Yellen’s proposed price ceiling.

“An EU agreement on an oil price cap coordinated with the G7 and others will significantly reduce Russia’s revenues,” said Ursula von der Leyen, head of the European Commission, the EU’s executive arm. “This helps stabilize global energy prices, benefiting emerging economies around the world.”

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Casert from Brussels and McHugh from Frankfurt, Germany. AP reporter Ameer Madani contributed from Washington.

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