G7, Australia and EU agree on a $60 per barrel price cap

• The G7, Australia and the EU agree to a $60 per barrel price restriction on Russian seaborne crude oil.
• The move is part of an effort to limit Russia’s capacity to finance its war against Ukraine through energy sales.
• Poland has already ratified the price cap.

G7, Australia, and the EU have agreed to a $60 per barrel price restriction on Russian seaborne crude oil as part of an effort to limit Russia’s capacity to finance its war against Ukraine through energy sales.

Friday, Poland agreed to the price, clearing the stage for formal ratification over the weekend.

G7 and Australia announced the price cap would begin on December 5 or soon after.

The Price Cap Coalition may consider further action to safeguard the price cap’s efficacy. No specifics were available about next steps.

The G7 price cap intends to restrict Russia’s oil profits while averting a worldwide oil price surge after an EU embargo on Russian petroleum takes effect on December 5.

Poland disputed the suggested $60 threshold and pushed for the limitation to be as low as feasible in EU negotiations to squeeze Russian income and limit Moscow’s war financing.

Poland’s EU Ambassador Andrzej Sados told reporters his country welcomed the EU deal, which kept the oil price cap at least 5% below the market cost.

US officials claimed the accord showed the coalition’s willingness to oppose Russia’s attack on Ukraine.

The EU presidency, held by the Czech Republic, tweeted Friday that “ambassadors have just secured an agreement on price cap for Russian seaborne #oil.”
Participating countries can only buy oil and petroleum products carried by sea at or below the cap.

As most shipping and insurance companies are based in G7 countries, the price cap would make it difficult for Russia to sell oil at a higher price.

The price ceiling would cut Russia’s income, said European Commission President Ursula von der Leyen.

The chair of Russia’s lower house foreign affairs committee said the union was jeopardizing its energy security.

Slutsky stated it violated market laws.

Von der Leyen tweeted that “it will help us stabilize global energy costs, benefiting emerging economies” and that the cap would be “adjustable over time” to react to market changes.

White House officials rejoiced.

“A price restriction will limit Mr. Putin’s ability to profit off the oil market so he can continue to kill innocent Ukrainians,” John Kirby said.

Europe needs to decide the discounted price other nations will pay by Monday, when the EU oil embargo and insurance prohibition take effect.

“Crippling Russia’s energy income is key to restraining Russia’s military machine,” said Estonian Prime Minister Kaja Kallas, who was glad the cap was lowered from prior plans.

Every dollar the cap was lowered meant $2bn less for Russia’s military chest.

Kallas said, “It’s no secret that we sought a lower pricing”

30-40 bucks would damage Russia. This is our best compromise.”

$60 is close to Russia’s crude price, which just plummeted below $60 a barrel. Some say it’s not low enough to affect one of Russia’s primary income sources.

It’s a large discount to Brent, which fell to $85.48 a barrel on Friday, but it could be high enough for Moscow to keep selling while rejecting a cap.

Putin has said Russia won’t supply oil under a price cap and will react against countries that do.

Putin and Biden are unlikely to discuss energy or the Ukraine war soon.

The White House said Biden doesn’t plan to talk to Putin right now, a day after Obama suggested he’d talk if Putin wanted to halt the war.

Biden said he would engage with Putin “if he’s interested in ending the war”. Putin “hasn’t done it yet,” he continued.

Kirby told reporters Friday, “Talks don’t seem helpful right now.”

Putin is open to negotiations, but the West’s demand that he first withdraw troops from Ukraine is untenable, according to Kremlin spokesman Dmitry Peskov.

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