The 27-nation European Union reached an agreement on Friday on a cap of $60 a barrel on the price of Russian oil, a tool designed by the West to deprive Moscow of the means to finance its war in Ukraine.
The agreement, which had been signed on Thursday by the ambassadors of the EU member countries in Brussels, coordinated in this file with their G7 allies, in particular the Americans and the British, as well as Australia, was suspended by the decision of Warsaw. , which gave the green light on Friday night.
The mechanism included plans to impose a cap of $60 a barrel on the prices of Russian oil sold to third countries, in addition to the EU embargo that takes effect on Monday.
European embargo
Russia has earned 67 billion euros from its oil sales to the EU since the start of the war in Ukraine while its annual military budget is around 60 billion a year, recalls Phuc-Vinh Nguyen, an expert on energy issues at Jacques- Delors Institute.
The EU system must prohibit companies from providing services that allow the maritime transport (freight, insurance, etc.) of Russian oil above the ceiling of 60 dollars, to limit Moscow’s income from its shipments to countries such as China or India. The instrument must strengthen the effectiveness of the European embargo that intervenes several months after the one already decided by the United States and Canada.
Russia is the world’s second largest exporter of crude oil and without this cap it would be very easy to deliver it to new buyers at market prices. Today, the G7 countries provide insurance services for 90% of global cargo and the EU is a major player in shipping, resulting in a credible deterrent, but also a risk of losing markets in benefit of competitors.
“Towards the unknown”
Poland was initially very critical of the effectiveness of the fixed cap, demanding a much lower price, some sources mentioning $30 per barrel.
The price of a barrel of Russian oil (crude from the Urals) currently fluctuates around 65 dollars, just above the European ceiling, so it has an effectively limited impact in the short term. Westerners have to deal with the interests of powerful British insurers or Greek shipowners.
The instrument proposed by the European Commission still foresees adding a limit set at 5% below the market price, in case Russian oil falls below the threshold of 60 dollars. In any case, the price must remain higher than production costs to encourage Russia to continue deliveries and not cut the floodgates.
Some experts fear a destabilization of the world oil market and wonder about the reaction of the OPEC countries, which will meet on Sunday in Vienna. The Kremlin had already warned that Russia would no longer deliver oil to countries that adopted this cap.
never seen”
Starting Monday, the EU embargo on Russian seaborne oil will remove two-thirds of its crude purchases from Russia. Since Germany and Poland decided on their own to stop deliveries through a pipeline by the end of the year, Russian imports will be affected by more than 90%, say the Europeans.
For Phuc-Vinh Nguyen, the proposed cap raises many questions. “There has never been a ceiling in the price of oil. We are in the unknown,” she summarizes, stressing that the reaction of the OPEC producing countries or large buyers such as India or China will be crucial.
According to him, a ceiling, even with a high tariff, will send “a strong political signal” to Russian President Vladimir Putin, because, once established, this mechanism can be hardened.
Source: BFM TV
