IEA: Russian Oil May Still Flow Despite Price Cap

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The executive director, the International Energy Agency (IEA), Fatih Birol, said yesterday that the will still need Russian oil to flow even with the planned cap.

The cap is proposed and pushed by the G7m with the purpose of allowing Russian oil to continue flowing, but at lower than market prices, still has many details to be hashed out, Birol said at the Singapore International Energy Week, as carried by Reuters.

Also Read: US Fears That Russia Could Still Evade The Oil Price Cap

Last month, the G7 group of the most industrialized nations agreed to finalize and implement a cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest. The G7 will ban maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap.

European Union ambassadors also endorsed the cap after reaching an agreement earlier this month to impose a new package of sanctions on Russia, including banning maritime transportation for Russian oil to third-party countries unless the oil is sold below or at a certain price cap.

Many analysts and experts doubt that the cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing because top importers China and India haven’t signed onto the price cap, and because Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.

Also Read: U.S. Assures OPEC That G7 Price Cap On Russian Oil Won’t Target Them

Last week, a U.S. Treasury official and industry representatives admitted to Reuters that could largely evade the cap because it would likely have access to enough own tankers and transport and insurance services to ship its oil.

There have been estimates that could continue to ship 80-90% of its oil outside the cap regime, and those estimates “are not unreasonable,” the unnamed U.S. official told Reuters.

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