BRUSSELS (AFP) – The European Union was close to setting a $60-per-barrel price for Russian oil. A highly predictable and complex political and economic maneuver designed to keep Russian supplies flowing to global markets while choking off President Vladimir Putin’s ability to fund his war in Ukraine.
Diplomats said on Thursday that European Union countries sought to push the limit across the finish line after Poland held out for the lowest possible number. “I’m still waiting for the white smoke from Warsaw,” said an EU diplomat, who spoke on condition of anonymity because talks were still ongoing.
The latest offer, confirmed by 3 EU diplomats, comes before the deadline for setting a lower oil price by Monday, when a European embargo will be imposed on Russian seaborne crude. A ban on shipping insurance for these supplies is in effect. The diplomats also spoke on condition of anonymity because the legal procedures had not yet been completed.
The figure of $60 means a ceiling close to the current price of Russian crude, which fell this week below $60 a barrel, and aims to prevent a sudden loss of Russian oil. to the world after the new Western sanctions. It’s a significant discount to international benchmark Brent crude, which traded at around $87 a barrel on Thursday, but could be high enough for Moscow to continue selling even as it dismisses the idea of a cap.
When the final figure is in place, a new Jupiter cartel will be born – which is expected to consist of both formal and informal members. Western allies in the Group of Seven industrialized nations led efforts to cap prices And you still need to agree to the number.
One coalition official, who was not authorized to comment publicly and spoke on condition of anonymity, expressed optimism that a deal could be reached as early as Friday, but cautioned that negotiations could continue into the weekend or perhaps even into Monday.
The official added that a price cap would help end the war faster. On the other hand, the official said that failure to put it in place would be “a win for Russia.”
Oil is the mainstay of the Kremlin’s financial revenues It has kept the Russian economy afloat so far despite export bans, sanctions and a central bank asset freeze that began with the February invasion. Russia exports nearly 5 million barrels of oil per day.
The risks of price ceiling failure are enormous for global oil supplies. If it fails or Russia retaliates by stopping oil exports, energy prices could skyrocket around the world. Putin said that he would not sell oil under a price ceiling, and that he would take revenge on countries that implement this measure.
American and European consumers could feel the consequences of higher gasoline pricesPeople in developing countries may face higher levels of food insecurity.
With the EU and UK banning insurance for Russian oil shipments, the rate cap allows companies to continue to insure tankers bound for non-EU countries as long as oil is priced at or below the cap. This would avoid price hikes due to the loss of supplies from the world’s second largest oil producer and cap Russia’s oil income close to current levels.
The Treasury Department has issued guidance intended to help companies and marine insurers understand how to adhere to the rate capsaying that the price ceiling can fluctuate depending on market conditions.
Robin Brooks, chief economist at the Institute of International Finance in Washington, said the cap should have been applied earlier this year, when oil was hovering around $120 a barrel.
“Since then, obviously, oil prices have fallen and a global recession has become a real thing,” he said. “The truth is, it’s unlikely to be binding given where oil prices are now.”
Critics of the rate cap measure, including former Treasury Secretary Steve Mnuchin, called the plan “ridiculous.”
Price caps were “not only not working, but I think it’s the most ridiculous idea I’ve ever heard,” Mnuchin told CNBC during a November panel discussion at the Milken Institute’s Middle East and Africa Summit.
Rachel Ziemba, a senior fellow at the Center for a New American Security, said that while the worst-case scenario envisions Russia cutting off global supplies of its oil, “the Saudis and Emiratis will ramp up production.”
“Russia has made it clear that countries that stick to the cap will not get their oil and this could lead to cuts in natural gas exports as well,” she said. “It’s going to be an interesting few weeks and an interesting few months.”
Hussein reported from Washington. Associated Press writer Aamir Madani in Washington and business writer David McHugh contributed from Frankfurt, Germany.