EU edges closer to $60-per-barrel Russian oil price cap

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BRUSSELS (AP) — The European Union moved closer to setting a $60 per barrel price cap on Russian oil — a long overdue and complex political and economic maneuver designed to keep supplies flowing from Russia to world markets while limiting President Vladimir Putin’s ability to fund his war in Ukraine.

EU countries tried to push the cap over the finish line after Poland insisted on getting as low a mark as possible, diplomats said on Thursday. “Still waiting for white smoke from Warsaw,” said an EU diplomat, speaking on condition of anonymity as talks were still ongoing.

The latest bid, confirmed by 3 EU diplomats, comes ahead of a deadline to set the price for discounted oil by Monday, when a European embargo on Russian crude by sea and a prohibition on shipping insurance for those deliveries comes into effect. The diplomats also spoke on condition of anonymity as the legal process was not yet finalized.

The $60 figure would mark a limit near the current price of Russian crude oil, which fell below $60 a barrel this week, and is intended to prevent a sudden loss of Russian oil. to the world after the new western sanctions. It is a deep discount to international benchmark Brent, which traded at around $87 a barrel on Thursday, but could be high enough for Moscow to keep selling even if the idea of ​​a cap is rejected.

When the final number is known, a new buyer cartel – expected to consist of formal and informal members – will be born. Western allies in the Group of Seven industrial powers led the price cap and has yet to approve the grade.

A coalition official, who was not authorized to comment publicly and spoke on condition of anonymity, expressed optimism that a deal could be reached as early as Friday, but warned that negotiations could be over the weekend or perhaps even Monday would continue.

The official added that introducing the price cap will help end the war more quickly. On the other hand, the official said not posting it would be “a victory for Russia”.

Oil is the main pillar of the Kremlin’s financial income and has so far propped up the Russian economy despite export bans, sanctions and the freeze on central bank assets that began with the February invasion. Russia exports about 5 million barrels of oil per day.

The risks of the price cap failure are immense for the global oil supply. If it fails or if Russia retaliates by halting oil exports, energy prices could skyrocket worldwide. Putin has said he will not sell oil below a price cap and will retaliate against countries that apply the measure.

American and European consumers could feel the effects of more spikes in gasoline pricesand people in developing countries could face greater food insecurity.

With the EU and UK banning insurance for Russian oil shipments, the price cap will allow companies to continue insuring tankers to non-EU countries as long as the price of the oil is at or below the limit. That would prevent a price spike from the loss of supplies from the world’s No. 2 oil producer and put a cap on Russia’s oil revenues close to current levels.

The Treasury Department has released guidelines designed to help companies and marine insurers understand how to comply with the price capsaying that the price cap may fluctuate depending on market conditions.

Robin Brooks, chief economist at the Institute of International Finance in Washington, said the limit should have been introduced earlier this year when oil hovered around $120 a barrel.

“Since then, oil prices have fallen markedly and the global recession is a fact,” he said. “The reality is that it is unlikely to be binding given current oil prices.”

Critics of the price cap, including former Treasury Secretary Steve Mnuchin, have called the plan “ridiculous.”

Mnuchin told CNBC during a November panel at the Milken Institute’s Middle East and Africa Summit that the price cap “not only wasn’t feasible, I think it’s the most ridiculous idea I’ve ever heard.”

Rachel Ziemba, a deputy senior fellow at the Center for a New American Security, said that while the worst-case scenario envisions Russia cutting off global supplies of its oil, “the Saudis and the Emirates would boost production.”

“Russia has made it clear that the countries that adhere to the limit will not receive their oil and that this may also lead to a reduction in natural gas exports,” she said. “These are going to be some interesting weeks and months.”

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Hussein reported from Washington. Washington AP writer Aamer Madhani and business writer David McHugh contributed from Frankfurt, Germany.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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