The Group of Seven (G7) and Australia agreed on a $60-a-barrel price cap for Russian offshore oil after European Union members persuaded Poland to reach a political deal, a statement said on Friday. The move is intended to deny the Kremlin military resources to continue its offensive in Ukraine. The EU agreed on the price after Poland expressed its support, paving the way for formal approval at the weekend.
In a statement, the G7 and Australia said the price cap would come into effect on or very soon after December 5. Nations said they expected that any price revision would include some form of protection of the antecedent, so that transactions entered into prior to the change could be carried out in compliance with the regulations. “The price cap coalition may also consider further steps to ensure the effectiveness of the price cap,” it said in a statement.
The G7 is an intergovernmental political forum of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States of America. The European Union is its “unlisted member”. The price cap was a G7 idea to reduce Russia’s income from oil sales while preventing a sharp rise in global oil prices after the EU embargo on Russian oil comes into effect on December 5. ceiling below the market price. In EU negotiations, Warsaw sought to keep the cap as low as possible to drain Russian revenues and limit Moscow’s ability to sustain the war in Ukraine.
Polish ambassador to the EU Andrzej Sados told reporters on Friday that Poland supports the EU deal, including a mechanism to keep the oil price cap at least 5% below the market rate, according to Reuters. US officials praised the deal as unprecedented, demonstrating their determination to oppose the Russian-Ukrainian war. European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s income. “It will help us stabilize global energy prices, which will benefit emerging economies around the world,” von der Leyen said, adding that the cap would be “adjustable over time” to respond to market developments.
The G7 price cap will allow non-EU countries to continue importing seaborne Russian oil, but will restrict shipping, insurance and reinsurance companies from handling cargoes of Russian oil around the world unless it is sold below cost. cap. Since the most important shipping and insurance companies are based in the G7 countries, the price cap is expected to make it very difficult for Moscow to sell oil at a higher price.
As US Tusury Secretary Janet Yellen said, the cap will benefit low- and middle-income countries in particular, which have borne the brunt of high energy and food prices. “With Russia’s economy already in decline and its budget increasingly stretched, the price cap will immediately reduce Putin’s most important source of revenue,” Yellen said in a statement. This will help limit Putin’s primary source of revenue for his war and maintain the stability of global energy supplies,” she said.
By: Vaishali verma
