The G7 group of nations and Australia said on Friday that a $60-a-barrel price ceiling for Russian offshore oil had been agreed upon after European Union members overcame resistance from Poland and reached a political deal earlier in the day.
Following Poland's approval, the EU agreed on a price, setting the stage for official approval over the weekend. Australian and G7 officials stated the price cap would be implemented on or after December 5. There has been a consensus between states that any price revision should include some form of insurance to ensure compliant transactions are completed before the revision takes effect.
"The Price Cap Coalition may also consider further action to ensure the effectiveness of the price cap," the statement read. After the EU embargo on Russian crude takes effect on December 5, the price cap, a G7 idea, aims to reduce Russia's revenues from oil sales.
Ambassador Andrzej Sados of Poland to the EU told reporters on Friday that Poland supported the EU's oil price agreement, which includes a mechanism to keep oil prices at least 5 percent below market rate. According to US officials, the deal was unprecedented and demonstrated the coalition's resolve against Russian aggression.
The EU's legal journal is expected to publish details of the deal on Sunday. Russia's revenues would be reduced significantly by the price cap, according to European Commission President Ursula von der Leyen. "It will help us stabilise global energy prices, benefiting emerging economies around the world," von der Leyen said on Twitter, adding that the cap would be "adjustable over time" to react to market developments.
Non-EU countries can continue importing Russian crude from the sea under the G7 price cap, but shipping, insurance, and reinsurance companies will be barred from handling cargoes of Russian crude worldwide unless they sell them for less than the ceiling price.
. As a result of high energy and food prices, low- and middle-income countries will particularly benefit from the cap, according to US Treasury Secretary Janet Yellen. "With Russia’s economy already contracting and its budget increasingly stretched thin, the price cap will immediately cut into Putin’s most important source of revenue," Yellen said in a statement.
Russian Ural crude was trading around $67 per barrel on Friday.
After days of haggling, EU countries added conditions to the agreement, including a review of the price cap in mid-January and every two months thereafter, according to diplomats and an EU document obtained by Reuters.
Reports from Reuters state that ships loading Russian crude before Dec. 5 and unloading at their final destination by Jan. 19, 2023 will be subject to a 45-day transition period.