By Julien Girault – AFP Dec 5, 2022
Embargo and cap
The cap is due to take effect alongside an EU embargo on maritime deliveries of Russian crude oil, which comes several months after an embargo imposed by the United States and Canada.
Russia is the world’s second-largest crude exporter and without the cap it would be easy to find new buyers at market prices.
The measure means only oil sold at a price equal to or less than $60 per barrel can continue to be delivered.
Companies based in the EU, G7 countries and Australia will be banned from providing services enabling maritime transport, such as insurance, with oil above that price.
The G7 nations — Canada, France, Germany, Italy, Japan, the United Kingdom and the United States — provide insurance services for 90% of the world’s cargo and the EU is a major player in sea freight.
This means they should be able to pass on the cap to the majority of Russia’s customers around the world, making for a credible price cap.
There is a transition period, and the cap will not apply to cargoes loaded before Dec. 5, and a further cap on oil products will come into effect on Feb. 5.
Market impact
The West has adopted the cap of $60, well above the current cost of producing oil in Russia, so Moscow will have an incentive to continue pumping crude. Russia will continue to earn revenue, even if it is reduced.
“Russia must retain an interest in selling its oil” or risk reducing global supply and causing prices to soar, said one European official, who did not believe the Kremlin’s threats to stop deliveries to countries complying with the cap.
The official said Russia would remain concerned about maintaining the state of its infrastructure, which would be damaged if production is halted, and keeping the confidence of its customers, including China and India.
Experts are worried about a leap into the unknown and keeping a close eye on the reaction of the OPEC+ major oil-producing countries.
“We will sell oil and oil products to countries that will work with us on market terms, even if we have to reduce production somewhat,” Russia’s Deputy Prime Minister Alexander Novak said after an OPEC+ videoconference on Sunday.
“We are currently working on mechanisms to prohibit the use of the price cap tool at any level,” Novak added, warning that the cap can only cause “further market destabilization.”
But Brussels insists the cap will help stabilize the markets and “directly benefit emerging economies and developing countries,” which will be able to get hold of Russian crude at a lower cost.
The market price of a barrel of Russian Urals crude is currently hovering around $65 a barrel, suggesting the measure may have only a limited impact in the short term.
Ukraine suggested on Saturday that the cap should have been set even lower, arguing that the $60 level is not enough to penalize the Kremlin.
A revisable cap
The cap will be reviewed from mid-January and then every two months, with the option to modify it according to price changes. The principle is for the cap to be at least 5% below the average market price.
Any revision would need the agreement of the G7, Australia and the EU.
Effectiveness
All countries are invited to formally join the measures. States that do not adopt them can continue to buy Russian oil above the price cap, but without using Western services to acquire, insure or transport it.
“We have clear signals that a number of emerging economies, particularly in Asia, will observe the principles of the cap,” said a European official, adding that Russia is already “under pressure” from its customers to offer discounts.
It would be very complicated to find alternatives for services provided by European companies, which dominate tanker transport and insurance, the official said. Improvised substitutes, including insurance for oil spills, would be “extremely risky,” he said.
Risks
Each EU and G7 state will have to monitor companies based in its territory. If a ship flying the flag of a third country is identified carrying Russian oil at a price above the cap, Western operators will be banned from insuring and financing it for 90 days.
While Russia could be tempted to create its own fleet of tankers, operating and insuring them itself, Brussels believes “building a maritime ecosystem overnight will be very complicated” — and such make-do measures could have trouble convincing customers.
Just want to give my personal thanks to Aleister Nicox of Kiev for his never ending dedication to the Jewish Zionist “Commie”cause.
Trying to convince everybody that I, Zelensky the Khazarian am not a Jewish Zionist Whore and that Ukrainians are Aryans and not Slavs goes beyond the call of duty.
Special place in hell for such dedication to outright lies.
The lefties now want to interfere with the cost, supply and demand of oil
Shouldn’t the lefties be wanting the price of oil to be high so less is burned? They say they want the price of oil to be low to help emerging economies and (broke European ones).
“Live interactive chart of West Texas Intermediate (WTI or NYMEX) crude oil prices per barrel. The current price of WTI crude oil as of December 02, 2022 is 80.34 per barrel.”
Anyway it looks like US/UK sanctions on Russia have failed but there’s a caveat, we won’t ship your oil if you don’t agree to the cap.
The Russians would be better off cutting off all supplies to the West immediately. Don’t give the West the time it needs to try and create some sort of cushion. Push NATO country economies over the brink into complete collapse. War is coming and nothing can stop it, so better to act now.
An ugly jewish woman, Sarah Nutenyahu finds herself in serious trouble. Her business has gone bust and she’s in dire financial straits. She’s so desperate that she decides to ask God for help.
She begins to pray… “God, please help me. I’ve lost my business and if I don’t get some money, I’m going to lose my house as well. Please let me win the lottery.”
Lottery night comes, and somebody else wins.
She again prays… “God, please let me win the lottery! I’ve lost my business, my house and I’m going to lose my car as well.”
Lottery night comes and she still has no luck.
Once again, she prays… “My God, why have you forsaken me? I’ve lost my business, my house, and my car. My children are starving already.
I don’t often ask You for help, and I’ve always been a good servant to You. PLEASE let me win the lottery just this one time so I can get my life back in order.”
Suddenly there is a blinding flash of light as the heavens open. The jewess is overwhelmed by the Voice of God, Himself….
“Sweetheart,
work with Me on this….
Buy a ticket.”
I bet India and China won’t mind.
the west is in cloud cuckoo land. It won’t work. Russia will both stop all exports to the west and continue to ship to euroasia and africa as well as insure. Insurance will be for the buyers account at CIF and no doubt be cheaper. Go for it President Putin – the west cannot fight a war without diesel or gasoline or electricity.
Why does anybody mention Australia in these discussions, we get our oil from Indonesia. We have our own oil (that we do not sell to Australians). None of this BS you people are going on with has anything to do with us. It is about time the rest of the world treated us with the respect we deserve and ignored us. Australia is a loudmouth arse lucking bully who needs to have its but kicked.
Price caps never work. Price caps are a political response to inflation. If you can actually cap a price, with inflation raging, you will soon not have that commodity on the market. No one is going to sell under what it is worth.
The Fed recently jacked M1 money supply through the roof, a 16 trillion increase in a year:
https://fred.stlouisfed.org/series/M1SL
This is causing massive inflation worldwide, as the US Dollar is the hegemon currency, the USA is exporting inflation to all nations. That is the real underlying reason prices in Germany are exploding.
Currently the Fed is trying to tame inflation, and the market speculators think that the Fed is near a pivot, just one more interest rate hike they say. That is 100% wrong, the Fed rate is still way below the inflation rate, to stop inflation they must jack rates ABOVE the inflation rate.
So the Fed is way behind the power curve, and the pivot is a fantasy:
https://i.imgflip.com/73a1bm.jpg
The Fed is going to jack rates to the moon, and everything financed will therefore go to the floor.
Went to local bottle shop & put a Price Cap on a slab of beer…Cap was $6.00 for a dozen stubbies.. I was told to get f*****d & get the hell out of the shop ??
Can’t understand that it work for the free world & didn’t work for me ???