Russian oil is selling well below the $60 per barrel threshold. The EU aims to keep the limit at 5% below the average market rates.
The G7 countries are unlikely to revise the Russian oil price ceiling this week, despite reports that oil prices are now well below the current $60 threshold.
Member states of the European Union have been informed that the G7, which is responsible for setting and changing the price cap, has little interest in changing the ceiling at this stage. Bloomberg writes about this, citing sources.
Negotiations between the European Commission and the G7 are likely to continue after the summit of EU leaders to be held in Brussels this week.
The G7 previously agreed to renegotiate the price level in mid-March, and EU law stipulates that the goal should be to keep the threshold at 5% below average market rates.
The cost of Russian oil
A report from the International Energy Agency (IEA) last week showed that Russian crude oil and petroleum products were trading below the marginal price last month.
According to the IEA, the average export price for Russian oil was $52.48 per barrel, excluding shipping and insurance costs. Urals oil, Russia’s key export blend, was sold on the Black Sea market for $45.27, while blends such as ESPO, Sakhalin and Sokol, destined for shipment to Asia, were sold well above the established ” ceiling”.
According to an EU diplomat, Poland and the Baltic states are pushing for a cut in the cap price to at least $49 to put additional pressure on Russia’s finances.
EU ambassadors were told on Sunday that G7 discussions showed no sign of change, two people familiar with the talks told Bloomberg. The European Commission has told diplomats that discussions will continue, including after a summit of EU leaders this week, and the EC will continue to engage with the G7 based on data provided by the IEA, the sources added.
Countries like the US have been less willing to change the cap on Russian oil, arguing that the cap is working as Russia’s revenues fall and spending rises as oil continues to hit world markets, the sources say.
However, measuring the impact of the restriction itself is difficult, in part because it was introduced in parallel with the EU embargo that cut Moscow off from one of its largest markets.
A group of researchers recently reported that Russia is selling some of its oil above the price limit and recommended strengthening enforcement.
Oil embargo against Russia
As UNIAN reported earlier, European countries and their allies have taken a number of steps to reduce Russia’s oil revenues in order to limit the Kremlin’s ability to finance its war in Ukraine.
Thus, the EU and G7 countries have banned almost all marine oil imports from Russia since December 5, 2022. As part of the oil embargo, an upper price limit for the sale of Russian oil was introduced at $60 per barrel. And from February 5, 2023, the EU and G7 oil sanctions have extended to diesel fuel and other oil products from the Russian Federation. Price ceilings on Russian crude oil and oil products are also designed to keep energy supplies from the Russian Federation to world markets while limiting revenues from their sale.
In accordance with the agreed rules, the EU and G7 companies can provide delivery, insurance and other services necessary for the sea transportation of Russian oil to third countries around the world, only if the goods were purchased at or below the threshold price. At the same time, Russia can freely transport and sell oil at any price, if it does not use the services and ships of the G7 countries and the EU.
EU and G7 companies providing tankers and these services are required to carry out due diligence and collect data indicating that oil was bought at a price below the agreed threshold. These records must be kept so that public authorities can access them in the event of inspections and investigations.
Because of the sanctions, Russia began to increase the “shadow” fleet of tankers for oil transportation. For example, in India and the United Arab Emirates, companies have emerged that own $2 billion worth of tanker assets. In less than a year, they have assembled a fleet that now delivers millions of barrels of Russian oil around the world.