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EU Foreign Policy Chief Seeks Lower Price Cap on Russia’s Oil
Kaja Kallas, the EU’s foreign policy chief, is pushing for the European Union to lower the price cap on Russian oil to further reduce the oil revenues for the Kremlin, Kallas told Bloomberg Television in an interview on Tuesday.
“I’m really pushing for this to be lowered because it has a clear effect,” said Kallas, who is the High Representative for Foreign Affairs and Security Policy and Vice-President of the European Commission.
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The current price cap mechanism set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.
“Russia is struggling because their national fund is depleted and they don’t get the same revenues that they did from oil and gas,” Kallas told Bloomberg.
“But there is still room that we can use. Definitely countries need to discuss that.”
Six EU members have already called on the Commission to lower the price cap set on Russian oil.
“Measures that target revenues from the export of oil are crucial since they reduce Russia’s single most important income source,” Sweden, Denmark, Finland, and the three Baltic states – Estonia, Latvia, and Lithuania – said in a letter, as quoted by Reuters.
“We believe now is the time to further increase the impact of our sanctions by lowering the G7 oil price cap,” they added.
Russia, for its part, has repeatedly stated it would not comply with any price caps. Russia took to using its own tankers and its own insurers as well as coverage providers from Asia and the Middle East. An oil price shock was avoided, at the cost of Russian oil continuing to flow quite freely until now, only in a different direction—to the East of Suez.
By Charles Kennedy for Oilprice.com
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Charles Kennedy
Charles is a writer for Oilprice.com
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Just look at the global energy markets to see that they are dominated by Russia and its economy which is the fourth-largest in the world after China, US and India based on purchasing power parity (PPP).
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert