E.U. Agrees on Russian Oil Price Cap of $60 per Barrel Despite Zelensky's Urging
Ukrainian president wanted the price cap to be set at $30 per barrel
NOTE TO READERS: Each week, The Trends Journal magazine provides its subscribers with news analysis and trend forecasts without any corporate influence. We answer only to our subscribers. Please consider signing up here.
After months of heated debate, leaders from the European Union agreed to slap a price cap on Russian seaborne oil at $60 a barrel in hopes that it will further erode the Russian economy and put pressure on the Kremlin to end its campaign in Ukraine.
Volodymyr Zelensky, the Ukrainian president, said earlier that he thought $30 per barrel was the magic number.
LAVROV: U.S. IS AT WAR WITH RUSSIA
"Limiting the price of Russian oil, they sound like $60-70 per barrel, this is, of course, a giveaway. More like a desire to portray something than to do. I am grateful to our Baltic and Polish colleagues for their suggestions. A price cap of $30 a barrel seems like a better proposition," Zelensky said.
Officials were scrambling to agree on a cap by 5 December when the European Union’s ban on Russian oil imports takes effect. The G7 nations put forward the prospect of capping the price paid for Russian oil as an additional means of denying Russia income that could be used to fund its war in Ukraine.
U.S. TRAINS WITH ISRAEL TO PRACTICE BOMBING IRAN
In addition, Australia and the G7 has been trying to deny Russia access to ocean shipping services to carry its oil.
The proposed cap is higher than the price Russian oil now fetches on world markets. Russia is selling its oil at a discount to market prices in order to sell as much as possible to make up for revenue lost to Western sanctions.
“If the price cap is set at the price Russia is currently selling its oil, it’s hard to see how the policy will cut [Russia’s] profits,” researcher Edward Fishman at Columbia University’s Center for Energy Policy pointed out to the Financial Times.
“Hopefully, this [level] would be just a starting point and the West is prepared to tighten it as market conditions ease,” he added.
Recently, Russia was collecting $56 a barrel for its oil while OPEC was charging $84. That led some officials to point out that a cap above $60 would be almost meaningless.
Several European countries also have argued that the price cap would be almost impossible to monitor and enforce.
CNBC, citing an EU document, said the price limit will be reviewed regularly to monitor its market ramifications, but it should be “at least 5% below the average market price.”
CNN noted that Urals crude, Russia’s benchmark, “has already been trading within or close to that range. EU countries such as Poland and Estonia had pushed for the cap to be lower.”
Zelenskyy needs to go the way of Ngô Đình Diệm, the president of South Vietnam, in 1963.