Member nations of the European Union are hoping to strike a deal on a price cap for Russian oil products this Friday, after delaying a vote on Wednesday due to disagreements among member states.

A fortnight ago, the European Commission had put forward a proposed price cap of $45 per barrel for discounted Russian oil products, such as fuel oil.

The EC also proposed a $100/barrel restriction on premium Russian oil products, such as diesel.
Reuters reported yesterday that a settlement is hoped for on Friday, but optimism is not running high as all 27 members of the bloc must agree on the final price cap figures in order to move forward by February 5th, when the price cap is set to go into effect.

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A similar chain of events took place last week, when EU officials failed to reach an agreement on Friday, January 27th. Last week, EU officials also discussed the G7’s $60/barrel price cap on Russian crude, which is set to be reviewed every two months.

In December, the EU agreed that the price cap set on Russian crude oil (currently $60) should be maintained at a minimum of 5% below average market rates.

The Baltic states of Estonia and Lithuania, along with Poland, are all pushing for a lower price cap on Russian crude, while simultaneously pressuring the bloc for a higher price cap on Russian oil products starting on February 5th. These countries are seeking a $40-$50 price cap on Russian crude to hamper Moscow’s revenue collections, which are financing Putin’s war against Ukraine.

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With regards to the February 5th price cap on Russian oil products, diesel remains a significant hurdle in the agreement. According to the European Commission, the $100 price cap on Russian diesel may be high enough to ensure that Moscow continues to export, but could result in Asian buyers balking at prices and opting instead to buy cheap Russian crude and refine diesel at home, Reuters reported.

By Ken Okoye

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