The Group of Seven nations are unlikely to revise the price ceiling for Russian oil this week, despite initial evidence that crude is selling well below the current $60 threshold.
European Union member states were informed over the weekend by the bloc’s executive branch that there is little interest among the G-7 — charged with setting and changing the price cap — to modify price levels in this stage, according to people familiar with the matter. . Talks between the European Commission and the G-7 are likely to continue beyond a summit of EU leaders in Brussels this week, two of the people added.
European countries and their allies have taken a series of measures to reduce Russia’s oil revenues, a key source of revenue for the national budget, in order to limit the Kremlin’s ability to finance its war in Ukraine. The price caps on Russian crude and refined products are also designed to keep the country’s energy flowing to world markets while reducing revenues.
The G-7 previously agreed to review the price level in mid-March, and EU law states that the aim should be to keep the threshold at 5% below average market rates.
Spokesmen for the commission and the US Treasury had no immediate comment.
An International Energy Agency report last week showed Russian crude oil and oil products sold for less than last month’s peak price. The weighted average export price of Russian crude was $52.48 per barrel, excluding shipping and insurance costs. Urals crude, Russia’s key export blend, sold for $45.27 in the Black Sea market, while blends such as ESPO, Sakhalin and Sokol, designed to be shipped to Asia, traded heavily for above the limit, according to the IEA.
Poland and the Baltic nations have been pushing to lower the price cap to at least $49 to put more pressure on Russia’s finances, an EU diplomat said. Estonian Prime Minister Kaja Kallas said on Twitter last week that it is “time to review it and further reduce it to reduce Russia’s ability to wage war against Ukraine.”
EU ambassadors said on Sunday that the G-7 discussions showed no signs of change, two people familiar with the negotiations said. The commission told diplomats that discussions would continue, even after this week’s summit of EU leaders, and that the bloc’s executive arm would continue to engage with the G-7 on the basis of the data provided by the IEA, the people said.
Nations such as the United States have been less inclined to alter price levels, arguing that the cap works as Russia’s revenues have fallen and its costs have risen, while oil continues to flow to global markets, they said. say the people
However, measuring the impact of the cap itself is complex, in part because it was introduced alongside an EU embargo that cut Moscow off from one of its biggest markets.
A group of researchers recently reported that Russia has been selling some of its oil above the price cap and recommended stepping up enforcement.
Under the agreed rules, EU and G-7 companies can only provide shipping services and services such as the insurance needed to transport Russian oil to third countries around the world when the products are have bought at or below a threshold price. Russia is free to transport and sell oil at any price if it does not use the services and ships of the G-7 and the EU.
EU and G-7 companies providing ships and these services must carry out due diligence and collect certificates showing that the oil has been bought below the agreed price threshold. Records must be kept so that government authorities can access them in the event of inspections and investigations. But it is essentially a self-regulatory regime with few controls and active reporting requirements that depend on companies complying with the rules and the willingness of national authorities to verify.
