Europe and the G7’s agreement to cap Russian oil at $60 per barrel is not supposed to disrupt international oil markets, according to European Commission Vice-President Frans Timmermans.
“On the price that was set, we are between two things. We want to reduce the income Putin gets from his oil because he’s financing his barbaric war with it and all the atrocities the Russians are committing in Ukraine,” Timmermans said.
“And at the same time also in close dialogue with our transatlantic partners, they are also asking of us and we agree that we should not disrupt international oil markets. That would not help us either.”
At the same time, an EU ban on imports of oil from Moscow came into effect on Monday.
Alan Gelder from research company Wood McKenzie told Euronews that even if Europe is no longer buying Russian oil, the price cap is still relevant since it means that European shipping and insurance firms will not be able to transport Russian oil when sold above this price.
“So, the idea for the price cap is to enable maritime financial services to be provided to enable the Russian oil crude to flow, but to do it in a way that tries to reduce Russia’s revenues from these flows,” Gelder said.
Russia’s oil exports matter enormously to the world as it is the world’s second-biggest crude exporter, after Saudi Arabia.
In 2021, around half of those exports went to Europe.
But Europe is also the biggest provider of shipments and insurance services, and this is why it is so important to prevent European tankers from working with countries such as China or India if they do not accept the price cap.
But Gelder is not convinced it will work.
“We’ve been quite sceptical that it would have a material reduction in Russian oil flows. We don’t think China and India will participate in this price cap and so flows to them will largely continue,” he told Euronews.
“A lot of the EU nations will participate in that, but they are actually banned from processing Russian crude as of today. So we don’t think it is going to be that disruptive to time. Time will tell.”
The Kremlin has reacted saying it will seek to “ban” oil sales under the price cap even if that meant cutting oil production.
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