Europe Union is said to be currently discussing the possibility of further lowering the $60 price cap over Russian crude oil to put additional pressure on Putin, but, quoting unnamed sources, Bloomberg said last night that US President, Joe Biden may not be disposed to the proposal.
The G-7 price cap is expected to go through review every two weeks, wherefore the next review comes up next week, at which point market conditions are considered to ensure that the price cap remains at least 5% below average prices.
In a report yesterday, Reuters noted that Poland and Lithuania are still pressing to lower the price cap on Russian oil below $60, and are also asking for sanctions targeting Russia’s nuclear industry. Estonia has also pushed for a lower price cap.
According the plan by G-7 and their EU allies, by February 5, an additional price cap on Russian refined oil products will come into force, and according to Bloomberg sources, the Biden administration would prefer to wait to see the impact of this before considering any changes to the December 5 price cap, which require unanimity.
Meanwhile, Russian Urals crude is now trading well below international prices. The Center for European Policy Analysis [CEPA) said complications in trading Russian oil, in particular, have now resulted in a large (30%-40%) discount being applied to Russian oil.
“The oil price cap might have been set at $60, but the Urals oil blend is now trading significantly lower than this,” the Center said
The net results, according to CEPA, is that “Russia has lost more than half the physical volume of its former gas sales to Europe, and prices of gas in Europe are now back to pre-February levels. This could potentially see Russia lose $50bn in annual business in 2023”.
This counters initial criticism of the cap scheme by several politicians, including former U.S. Treasury Secretary Steve Mnuchin who described the cap idea as “not only not feasible”, but “the most ridiculous idea I’ve ever heard”.
So far, Russia has responded by placing a ban on the purchase of Russian crude and petroleum products for five months from any country obeying the cap.