The United States and its allies are hoping to cap Russia’s crude oil price at $60 per barrel, the Wall Street Journal said yesterday, quoting people familiar with the talks.
It said that the officials are however hoping to consider a number of price tags when the group meets today [Wednesday].
Talks about oil price tag against Russia oil sale is being considered by the US and its allies as one of the strategies that would dim Russia’s revenue from its oil and gas, and by extension reduce its ability to prosecute the ongoing military aggression in Ukraine
According the plan of the G7, the take off of the price cap against, Russian crude oil will become effective from December 5, 2022. Also the European Union group and the EU hopes to ban Russian crude oil imports from the same date.
The US-led price capping mechanism of the G7 and the outright ban from the EU has the potential to disrupt 2.5 million bpd or more of seaborne crude oil to Europe. Russia reaffirmed its threat this week that it would not supply any crude oil to nations that operate under this price cap, redirecting its crude oil to “market-oriented partners”. According to Russian Deputy Prime Minister Alexander Novak, Russia could even reduce production in reaction to the price-capping strategy.
Last week, the G7 was scrambling ahead of the December 5 deadline that is approaching fast. The EU regulations necessary to navigate the post-December 5 oil markets still hadn’t been drafted or finalized, pending the determination of the actual price level.
The price cap plan will hold all buyers within the group to purchase crude oil from Russia only if it can be purchased below a set minimum. The plan looks to restrict Russia’s oil revenues while still allowing crude oil customers to source their oil from Russia.
At $60, the price cap would be nearly $30 per barrel under the current Brent barrel price, translating into a fine, attractive discount for any crude buyer. Russia has not made any replies on the price tag strategy