G-7 joins EU on $60-per-barrel price cap on Russian oil

WASHINGTON (AP) – The Group of Seven countries and Australia joined the European Union on Friday in agreeing to a $60 barrel price on Russian oil, a key step as Western sanctions seek to restructure the global oil market. to prevent price spikes and hungry President Vladimir Putin money for his war in Ukraine.

Europe is expected to set the price cuts that other countries will pay on Monday, when EU sanctions on Russian oil are lifted by sea. and prohibition of insurance for those facilities in operation. The price is paid, the G-7 is led by wealthy democraciesaims to prevent the sudden loss of Russian oil in the world that could lead to a new increase in energy prices. and before honey inflation.

The United States Treasury Secretary Janet Yellen said in a statement that the agreement will help prevent “Putin’s source of capital for the illegal war in Ukraine and at the same time protect the stability of global power.” “

The agreement comes after last-minute negotiations. Poland has long supported the EU agreement, seeking to set the cap as low as possible. Following more than 24 hours of negotiations, when other EU countries indicated they would support the deal, Warsaw finally relented late on Friday.

A joint statement issued by the G-7 on Friday says that the group is “prepared to review and modify the maximum price as appropriate,” taking into account market developments and the possible effects on members. cooperation with low- and middle-income countries.

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Estonian Prime Minister Kaja Kalas said, “Increasing Russia’s energy income is key to stopping Russia’s war machine, adding that she was pleased that the cap was lowered by a few dollars from the original policy.” He said every dollar cut from the cap equates to $2 billion less for Russia’s war chest.

“It’s no secret that we want the price to be lower,” Kallas added, highlighting the differences within the EU. “A price between 30-40 dollars is something that will hurt Russia a lot. However, this is the best deal we can get.”

The $60 price is keeping current Russian crude prices, which have fallen below $60 per barrel. Some criticize that there is no land that decreases in one of the main sources of income in Russia. It’s still a big drop from international Brent, which fell to $85.48 a barrel Friday, but it may be too high for Moscow to keep selling even as it rejects the idea of ​​a cap.

There is a big risk for the global oil market of losing a lot of money from the world’s second largest producers. It could raise the price of gasoline for motorists around the world, which caused a political crisis for US President Joe Biden and leaders in other countries. Europe is already in an energy crisisand the government faces protests over rising housing costswhile the developing countries are also more vulnerable to the exchange of electricity.

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But the West has come under increasing pressure to focus on one of Russia’s biggest earners. – oil – money cuts go into Putin’s war chest and damage Russia’s economy as the war in Ukraine drags on for the ninth month. Oil and natural gas prices are up When the demand from the disease resumed, then the invasion of Ukraine was no longer possible, providing the Russian purse.

US National Security Council spokesman John Kirby told reporters Friday that “the cap itself will have a positive effect on reducing Mr. Putin’s ability to profit from the oil market and restrict his ability to maintain using the money to fund his war machine.”

However, other uncertainties lie ahead. Prevention of COVID-19 in China and a slowing global economy may mean less thirst for oil. That’s what OPEC and the allied countries that produce oil, including Russia, pointed to a reduction in world supply in October.. OPEC+ will meet next Sunday.

That competes with EU sanctions that could take more oil off the market, raising fears of supply shortages and higher prices. Russia exports about 5 million barrels of oil per day.

Putin has said that he will not sell oil below the price and that he will retaliate against countries that do this. However, Russia has taken a big lead in what it exports to India, China and other countries in Asia and reduced prices because Western customers avoided it even before the EU restrictions.

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Many insurers are based in the EU or the United Kingdom and may be required to participate in the pricing.

Russia can also sell oil on the books using “dark” vessels with limited capacity. Oil can be transferred from one vessel to another and mixed with similar oil to change its origin.

Even in those cases, the cap would make it “expensive, time-consuming and difficult” for Russia to sell oil around the barrier, Maria Shagina, an expert on sanctions at the International Institute for Strategic Studies in Berlin said.

Robin Brooks, chief economist at the Institute of International Finance in Washington, said that prices should be kept in check when oil hovers around $120 a barrel this summer..

“Since then, it’s clear that oil prices have fallen and a global recession is a reality,” he said. “The reality is that it’s unlikely to be integrated where oil prices are now.”

European leaders discussed their role in the price movement, which originated from Yellen.

Ursula von der Leyen, president of the European Commission, said, “The EU’s agreement on oil prices, which it has with the G7 and others, will significantly reduce Russia’s income.” “It will help us support global energy costs, benefiting emerging economies around the world.”

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Cast reported from Brussels and McHugh from Frankfurt, Germany. AP reporter Aamer Madhani contributed in Washington.

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