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28 Nov, 2022 22:24

EU states fail to agree on Russian oil price cap – Reuters

Poland reportedly considers the currently proposed ceiling insufficiently punitive
EU states fail to agree on Russian oil price cap – Reuters

EU governments have been unable to agree on a proposed price cap for seaborne Russian crude oil as of Monday, diplomats told Reuters. Poland and some Baltic states have reportedly demanded that the $65-70 figure proposed by the G7 countries be lower still, in order to hamper Russia’s ability to finance its military operation in Ukraine.

Warsaw insists the proposed cap will not have the desired effect on Moscow, pointing out that the country’s oil is currently trading somewhere between $52 and $63.50 per barrel. Along with Lithuania and Estonia, Poland has urged the bloc to set a ceiling of $30, allowing Moscow just $10 in per-barrel profits, assuming a production cost of $20 per barrel.

The three countries also want to add a review mechanism so that the cap can be revised further down should the desire arise, and have called for a more coherent outline of the next sanctions package targeting Russia.

Poland’s intransigence is reportedly irritating other bloc members, with one EU diplomat complaining to Reuters that Warsaw was “completely uncompromising on the price without suggesting an acceptable alternative” and adding there was a “growing annoyance with the Polish position.”

While Malta, Cyprus, and Greece had previously argued the G7’s proposed cap was too low, diplomats explained they secured concessions in the legal text and were willing to move forward with the current figures. Hungary withdrew its own opposition last week, after securing an exemption from the measure.

The price cap is supposed to prevent shipping, insurance, and reinsurance companies from doing business with Russian oil producers or resellers who try to sell the commodity at a profitable margin. Most major shipping and insurance companies are based in G7 countries, meaning an agreement among those nations would severely hobble Moscow’s ability to sell its oil at prices higher than the capped rate. Russia has repeatedly said it would not sell oil to any country that goes along with the cap.

Last week, Russia warned countries that supported the G7 price cap that they would be cut off from future oil sales. Foreign Ministry spokeswoman Maria Zakharova cited the economic and political destabilization that would result from such a measure, arguing it would set a “dangerous precedent” as oil-producing nations discover that they could be similarly targeted by ideologically-motivated sanctions.