European Union member states were informed by the bloc’s executive body at the weekend that there was little interest among the G-7 – responsible for setting and changing the price ceiling – to adjust price levels at this stage, according to people familiar with the matter. Talks between the European Commission and the G-7 are likely to continue after a summit of EU leaders in Brussels this week, the two people added.
European countries and their allies have taken a number of steps to reduce Russia’s oil revenues, a key source of revenue for the state budget, to limit the Kremlin’s ability to finance the war in Ukraine. Ceilings on the price of Russian oil and refined products are also designed to keep the country’s energy flowing to world markets while curbing revenues.
The G-7 previously agreed to review the price floor in mid-March, and EU legislation stipulates that the target should be to keep the threshold at 5% below average market rates.
A report from the International Energy Agency last week showed that Russian oil and oil products sold for less than the price ceiling last month. The weighted average export price of Russian crude oil was $52.48 per barrel, excluding shipping and insurance costs. Urals crude, Russia’s key export blend, was trading at $45.27 on the Black Sea market, while blends such as ESPO, Sakhalin and Sokol destined for Asia traded well above the limit, according to the IEA.
A spokesman for the commission did not immediately comment. Treasury spokeswoman Megan Apper said last week that the IEA report underscores that the price cap is working, limiting Russia’s revenue and its ability to finance the war while keeping energy markets well-supplied.
Poland and the Baltic countries are pushing to lower the price ceiling to at least $49 to put further pressure on Russian finances, an EU diplomat said. Estonian Prime Minister Kaja Kallas said on Twitter last week that it was “time to reassess and reduce further to reduce Russia’s ability to wage war against Ukraine.”
EU ambassadors said on Sunday that the G-7 talks showed no signs of change, two people familiar with the talks said. The commission told diplomats that discussions would continue, including after a summit of EU leaders this week, and the bloc’s executive branch would continue talks with the G-7 based on data provided by the IEA, the people said.
Nations such as the U.S. were less inclined to change price levels, arguing the cap was working because Russia’s revenues were falling and its costs were rising while oil continued to flow into global markets, the people said.
However, measuring the impact of the cap itself is difficult, in part because it was imposed at the same time as the EU embargo, which has cut Moscow off from one of its biggest markets.
A group of researchers recently reported that Russia is selling some of its oil above the price ceiling and recommended that enforcement be stepped up.
Under the agreed rules, EU and G-7 companies can only provide shipping and services such as insurance needed to transport Russian oil to third countries around the world if the products have been purchased at or below a threshold price. Russia is free to transport and sell oil at any price as long as it does not use the services and vessels of the G-7 and the EU.
EU and G-7 firms providing ships and these services must carry out due diligence and collect certificates showing that oil has been purchased below the agreed threshold price. Records must be kept so that government authorities can access them in the event of inspections and investigations. However, it is essentially a self-regulatory regime with few controls and active reporting requirements, dependent on companies complying with the rules and the willingness of national authorities to control
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