According to people familiar with the matter, EU member states are discussing capping the price of Russian crude oil at $60 a barrel to help secure an agreement between the wider EU member states and the broader Group of Seven leading economies, according to the APP of Zitong Finance.
EU negotiations to limit Russian oil production have been deadlocked since last week. Poland and the Baltic states have demanded a price that puts more pressure on Russian income, arguing that the current ceiling ($65-$70) is too generous. Greece and other shipping countries have been fighting for higher caps.
It is not clear whether both groups are open to the $60 price, but if that level and other requirements are met, most will accept it, according to people familiar with the matter. People familiar with the matter also said discussions were still under way.
The new cap will still be slightly higher than the current trading level of Russia's flagship crude oil products. The price cap was first proposed by the United States, which worried that EU sanctions were too stringent. The aim of the price limit order is to maintain Russia's oil supply to avoid a surge in global oil prices and to limit the Russian government's revenue.
This means that if it is to work, this level must be sufficiently attractive to the Russian government. If the price is higher than the market price, Russia and its buyers can argue that it is just business as usual. The risk for the oil market is that if the ceiling is set too low, Russia could deliver on the threat of shutting down oil production, pushing up global oil prices.
The figure of $60 has not yet been formally proposed and discussed by the European Union as a whole. EU ambassadors held a weekly meeting on Wednesday, but the cap was not on the official agenda. Any agreement at the EU level needs the support of all member states and the support of the Group of Seven. 'The price of $60 meets the requirements of the Group of Seven, 'said one of the people familiar with the matter.
Opponents also want the limit to include a censorship mechanism. Greece proposes to hold bimonthly meetings starting in mid-January to assess market developments in a timely manner, another person familiar with the matter said. Athens, along with Malta and Cyprus, has been seeking to ensure that the shipping industry is not discriminated against by international competitors because of restrictions.
Poland and the Baltic states have also called on the European Union to make more solid progress on a package of new sanctions. These measures are expected to be clear in the coming days.
The G7 countries aim to impose price caps ahead of broader EU sanctions on oil next Monday. The cap plan would ban services needed to transport and transport Russian oil, such as brokerage, financial assistance and insurance, unless the purchase price of the goods is below the agreed threshold.
Most G7 countries will stop importing Russian crude oil later this year. Similar restrictions on other oil products, including price caps, will be introduced in February.