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Garmisch-Partenkirchen, Germany (AP) — Leaders of the world's largest developed countries cap Russia's oil prices intended to attack the main financial pillars of the Kremlin's post-Ukrainian invasion — And to limit the turmoil that high energy prices are causing around the world.
Details have not been agreed at the Group of Seven Summit in Elmau, Germany, but the basic idea is to link price caps to services that enable oil trading. is. For example, insurance companies are prohibited from processing cargo that exceeds the limit.
These service providers are primarily based in the European Union and the United Kingdom, so it is expected that Russia will find it difficult to find a major workaround.
Limiting prices will reduce the Kremlin's oil revenues. At the beginning of the war, Europe alone was about $ 450 million a day. The cap also limits the impact of rising oil prices on consumer country inflation, and gasoline and diesel costs put pressure on consumers and businesses.
However, it depends heavily on whether Asian countries like India are in favor of price caps. The key issue is enforcement, and European officials are also cautious about side effects.
"I would like to dig deeper .... We want to make sure that our goal is to target Russia, not to make our lives more difficult. "We have," said Charles Michel, head of the 27-member government council of the European Union. "We need to have a clear and common understanding of what the direct impacts are and what can have incidental consequences."
The EU has agreed to phase out 90% of Russia's oil shipped by the end of the year, but is resentful of still paying the Kremlin's battlefield. However, EU countries need time to prepare new oil sources and are under pressure from the high prices of crude oil.
The government faces demands for even more stringent action, including the immediate termination of Russia's oil and gas shipments. The move states that many economists will cause a recession in Europe.
Already, concerns about the loss of supply from Russia to the global market helped boost global oil prices significantly, along with a recovery in demand from the COVID-19 pandemic. I am. The OPEC + alliance of oil-producing countries, including Saudi Arabia and Russia, has increased production, but it is too late to lower prices.
Russia sells less oil as Western buyers avoid supply, but higher prices have wiped out much of the country's financial losses. ..
The country's central bank has succeeded in stabilizing the ruble despite western sanctions, in part with the help of oil revenues. The international benchmark Brent crude oil is trading at $ 113 a barrel from $ 79 a barrel at the beginning of the year.
As a result, pump prices reached record highs of over $ 5 per gallon in the United States and over $ 7.50 in Germany.
"At current prices, this brings enormous benefits to the Kremlin," said Simon Talia Pietra, an energy policy expert at the Bruegel think tank in Brussels. "If the G7 agrees on a Russian oil price cap, it will be a very important step in limiting Putin's storm income."
Talia Pietra The EU's boycott delay to Russia's oil was "too late," especially given the cut-off of Russia's natural gas in recent weeks or the reduction to 10 EU countries. Western officials say Russia is "weaponizing" energy and taking advantage of Europe's dependence on Moscow's supply.
Russia was able to find non-Western buyers as Asian customers such as India and China replaced the EU as the largest buyer of oil shipped by sea.
Due to sanctions, Russian oil is trading at a significant discount on international benchmark Brent, increasing the profit margins of Indian refiners who convert crude oil to gasoline. And some Russian oil sales were simply off the books.
When Russian oil is refined into gasoline or blended with other crude oil, it is difficult to determine where it came from, especially if no one wants to scrutinize it.
"It is doubtful whether countries like India and China agree to stop buying Russian oil, especially if it is traded at a significant discount on world market prices. That's because, "commodity analyst Karsten said. Fritsch of Commerzbank in Frankfurt, Germany. "Instead, India is helping Russia continue to sell oil despite Western sanctions."
Frich said the Western certification body was for sanctions. After failing to do so, India said it was ready to provide safety certification to more than 80 ships belonging to a subsidiary of the Russian shipping company Sovcomflot, which is based in Dubai.
According to Rystad Energy, Russia's crude oil imports into Europe have fallen from 2.04 million barrels to 1.49 million barrels per day since European refiners began avoiding Russian oil in late February. .. Imports of Russian crude oil by Asian refiners, including China, increased correspondingly by 503,000 barrels per day.
"There is no growing expectation that Russian crude will no longer be traded in the international market, but instead a significant discount on Russian crude has redirected vessels to alternative markets," Ristad Energy said.
"The freeze on the western financial system has significantly increased the cost of financing these vessels and trade, but the Ural discounts are too attractive for some refiners to ignore." Mr. Ho added.