The European Union wants to ensure that Russia can only sell its oil by tanker at a low price in order to curtail the profits for the war chest of Russian ruler Vladimir Putin. All oil exports, including those to China or India, should fall under this sanction.
The group of the seven most important industrial nations decided on this approach in the summer. The EU has now incorporated this price cap into its eighth package of sanctions.
From December 5, the European Union and the G7 countries will ban banks, insurance companies and ports from financing the purchase and sale of Russian oil, insuring the ship’s cargo or unloading the cargo if the oil on board a tanker increases Prices are traded as set by the EU.
This is intended to achieve an embargo on services and transport related to oil exports that will make shipping almost impossible.
Concrete numbers have yet to be determined, according to the EU Commission. The price must be significantly below the current world market level and close to the prices that Russia was able to obtain before the war against Ukraine was unleashed.
The EU member states are still negotiating and have to approve the sanction unanimously. According to experts from the EU Commission, it is clear that the price limit must be dynamically adjusted to what is happening on the market. After all, you don’t want the world market price to fall below the upper limit set by the EU.
Yes! The import ban on Russian oil delivered by tanker applies only to the countries of the European Union and the other G7 countries USA, Canada and Japan, also from December 5.
Other customers in Asia, Africa or Latin America can continue to buy Russian oil, but then only at the fixed maximum price.
The countries with large tanker shipping companies such as Greece, Cyprus and Malta have succeeded in allowing ships from these countries to continue transporting oil to Asia, for example – if it is traded at a capped price.
European ships that sail the seven seas under flags of convenience from Panama or Liberia should also comply with the sanction.
The EU and the US want to put pressure on countries that offer flagging out and possibly impose their own sanctions on Panama, for example, which is less cooperative.
Russian oil destined for Serbia and other countries in the western Balkans is today unloaded in Croatian ports and then transported on to Serbia, which does not have its own seaport. This would no longer be possible from December 5, as Croatia, as an EU country, is subject to the EU’s import ban.
Serbia has not joined the sanctions, although it actually wants to join the EU. The EU must now decide whether or not Croatia can continue to supply oil to Serbia and other Balkan countries. In any case, the upper price limit would have to be observed.
There is no embargo on this oil, as Hungary, the Czech Republic and Slovakia can currently only be supplied with oil via the “Friendship” pipeline from Russia.
Poland and Germany, which could also obtain oil through this pipeline, have voluntarily renounced it in order to reduce Putin’s income. The price cap does not apply to pipeline oil.
As expected, Russia has sharply criticized the EU’s actions. “This would disrupt all market mechanisms. A detrimental effect on global oil production would be possible,” Russian Deputy Prime Minister Alexander Novak said on Russian state television.
However, the boss of the Western European mineral oil company “Total”, Patrick Pouyanne, also warned against a price cap. He doesn’t think it’s a good idea, Pouyanne said at an energy industry event in London. “I’m sure Putin will say we’re not wasting my oil. The world mark price would then no longer be $95, but $150.”
He would not want to put this leverage, this power in the hands of Putin, said Total CEO Patrick Pouyenne. Russia has already announced that it will no longer supply oil to countries that want to apply the price cap.
Author: Bernd Riegert
The original of this article “Global price cap for Russian oil” comes from Deutsche Welle.
