Russia: G7 Allies Say Oil Price Cap Will Not Apply To Resold Cargoes
The US and its allies have agreed that the price cap scheme against a cargo of Russian oil will only apply at the first sale of the oil to a buyer on land.
It means the upcoming price cap will not apply to the resale of the same Russian cargo any other time. The price cap will not apply to a cargo of Russian crude processed into gasoline when the gasoline is sold, either, sources familiar with the ongoing discussions told The Wall Street Journal last Friday.
However, intermediary sales and trades of Russian oil happening at sea should be subject to the price cap, according to the Journal’s sources. The G7 allies and Australia are working on putting final touches to the price cap proposal against Russia before the December 5 kickoff date, after which the EU embargo on imports of Russian crude oil by sea become effective.
The G7 group of the most industrialized nations and the EU are looking to introduce a price cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest.
In addition, the allies are banning maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap.
Reuters said the G7 members had agreed to set a fixed price for Russian oil exports as a cap rather than a price set as a discount to a benchmark. The price itself has yet to be determined, the agency quoted the source, adding that, according to the G7, “This will increase market stability and simplify compliance to minimize the burden on market participants.”
Earlier, a price range in the mid-$60s was mentioned as a possible target for the cap as it represented the range in which Russian oil has traded before the last rally.
While considering all the parameters of a price cap, the U.S. Treasury issued last week guidance that says Russian crude oil loaded onto a vessel at the port of loading for maritime transport prior to December 5 will not be subject to the price cap if the oil is unloaded at the port of destination before January 19, 2023.