The European Union agreed this Friday to establish a Price ceiling of USD 60 per barrel of Russian oil, in line with the G7 reprisals for the invasion of Ukraine. The rate is higher than the one Moscow adopted for its sales.
The measure will enter into force next Monday and will seek limit revenue from Russia, which allow it to stock up on weapons and other resources that it deploys in its offensive on Ukraine. Moscow is the second world oil exporter thanks to its shipments to China and India.
The cap, however, does not directly affect the community bloc since, together with it, a total embargo will apply to the crude it imports from Russia with the exception of that which Hungary buys by pipeline. This is because one of the main objectives is try to keep the oil flowing towards global markets.
For those ships at sea that are supplied before Monday, a grace price for 45 daysgiving them until January 19 to offload the oil, as well as a 90-day transition for any future price level changes.
Also, European shipping companies will be prohibited from transporting Russian oil to third countries if it is sold at a higher price than the one set.
Likewise, the agreement established that, if the market price falls below 60 dollars a barrel, the ceiling will be updated in such a way that it is at least 5% below the new price. Equally, the rate will be reassessed every two months to be able to align with the figures of the moment.
The President of the European Commission, Ursula von der Leyenassured that the measure on Russian crude “will reinforce the effect of the sanctions” against the Kremlin that both the bloc and USA Y Canada they have adopted since last February 24 – when the conflict began – and “will further reduce Russia’s income”.
Von der Leyen pointed out, in turn, that “it will stabilize global energy markets” because “it will allow part of Russian oil to be traded and transported by sea by EU operators as long as it is sold at a price below the cap.”
This limit will “directly benefit emerging and developing economies and it will be adjustable over time so that we can react to market events”, concluded the head of the Community Executive.
With this agreement, Poland terminated the veto that he had set ten days ago, since he wanted the ceiling agreed between the Twenty-seven to be considerably lower than that agreed by the G7of $65.
In exchange for this, Warsaw requested the commitment of its European partners to speed up the ninth package of sanctions against Vladimir Putin.
Instead, Greece, Malta and Cyprus defended a higher price, which would avoid damaging the business of their shipping companies that transport much of the crude that Moscow sends to other countries.
In addition, the new cap will prohibit insurance and reinsurance, and financial services for those ships that load crude oil purchased at a price higher than the agreed price, which would hinder the purchases themselves or their subsequent transportation.
Russia’s reaction
Attention is now focused on the Kremlin and its response to the measure. Diplomats have worked hard to get a level that is attractive enough for Moscow, to continue selling. This Thursday, the Minister of Foreign Affairs, Sergei Lavrov assured that the level of the maximum price is irrelevant.
So if the rate is above market, Russia and its buyers would argue that there has been no change; However, if the cap is set too low, Moscow could go ahead with its threats to shut down production, which would drive up world prices and put oil markets at risk.
(With information from EFE, AFP and Bloomberg)
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Source-www.infobae.com