©Health & Fitness Journal. FILE PHOTO: An aerial view shows the tanker Vladimir Arsenyev at the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka, Russia, August 12, 2022. REUTERS/Tatiana Meel/File Photo
By Jan Strupczewski and Kate Abnett
BRUSSELS (Health & Fitness Journal) – The European Union on Friday agreed a price cap of $60 a barrel for Russian sea crude after Poland gave its support, paving the way for a formal approval over the weekend.
Warsaw had resisted the proposed level as it was considering an adjustment mechanism to keep the cap below the market rate. She had urged the EU negotiations to keep the cap as low as possible to squeeze revenue to Russia and limit Moscow’s ability to fund its war in Ukraine.
Polish Ambassador to the EU Andrzej Sados told reporters on Friday that Poland supported the EU deal, which included a mechanism to keep the oil price cap at least 5% below the market price.
The price cap, an idea of the Group of Seven (G7) countries, aims to reduce Russia’s oil revenues while preventing a surge in global oil prices after an EU embargo on Russian crude on December 5 comes into effect.
A spokesman for the Czech Republic, which holds the EU’s rotating presidency and oversees EU countries’ negotiations, said it had started the written procedure for all 27 EU countries to formally give the deal the green light, following Poland’s approval.
Details of the deal are set to be published in the EU Legal Journal on Sunday.
The EU sees significant losses in Russian revenue
European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenues.
“It will help us stabilize global energy prices, which will benefit emerging markets around the world,” von der Leyen said on Twitter, adding that the cap could be “adjusted over time” to respond to market developments .
The G7 price cap will allow non-EU countries to continue importing Russian crude oil by sea, but it will ban shipping, insurance and reinsurance companies from handling cargoes of Russian crude oil around the globe unless it is under sold at the upper price limit.
With the main shipping and insurance companies based in G7 countries, the price cap would make it very difficult for Moscow to sell its oil at a higher price.
The White House on Friday welcomed news that the EU was “getting together” on the oil price cap and said it should cap Russian revenue.
“A price cap will help limit Mr. Putin’s ability to profit from the oil market so he can continue to fund a war machine that continues to kill innocent Ukrainians,” national security spokesman John Kirby (NYSE:) told reporters.
The head of the foreign affairs committee of Russia’s lower house told the TASS news agency on Friday that the European Union is endangering its own energy security.
The initial G7 proposal last week called for a price cap of $65-$70 a barrel with no adjustment mechanism. With Russian Ural crude already trading lower, Poland, Lithuania and Estonia pushed for a lower price.
Russian Ural crude was trading at around $67 a barrel on Friday.
EU countries have been bickering for days over the details, with those countries adding conditions to the deal – including that the price cap will be reviewed in mid-January and every two months thereafter, according to diplomats and an EU document Health & Fitness Journal reported on Thursday was presented.
The document also said a 45-day “transition period” would apply to ships carrying Russian crude loaded before December 5 and unloaded at its final destination by January 19, 2023.