G7, EU and Australia Announcing Global Price Cap on Russian Oil Products
On February 5, 2023, the Group of Seven (G7) countries, along with the European Union (EU) and Australia, are set to impose a global price cap on Russian-origin refined oil products. This price cap is part of a larger sanctions package in response to Russia’s invasion of Ukraine and is aimed at reducing the Kremlin’s oil revenues while also keeping energy prices steady.
The price cap for seaborne shipments of Russian crude oil was set at $60 per barrel last December. The new agreement will bar Western companies from handling cargoes of Russian oil products unless they are sold below the set prices, which will be $100 per barrel for premium oil products such as diesel and $45 for “discount-to-crude” products such as heating oil.
The impact of the sanctions will be felt particularly in the EU, where the ban on Russian oil products will take effect on Sunday, February 5. These imports will have to be replaced with alternative sources of fuel, as they represent around 1 million barrels per day of diesel fuel.
The G7 and Australia have stressed that the price cap is intended to keep Russian oil available on global markets, while also curbing the Kremlin’s income. The agreement is expected to come into effect at the same time and will bar Western shipping firms and insurers from facilitating Russian oil exports sold above the cap level.
The sanctions are part of a broader effort by the U.S. and its allies to limit Moscow’s energy exports, the most essential sector of its economy. The EU, the G7, and Australia hope that the new measures will help to prevent Russia from earning exorbitant profits from its oil exports.
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