EU Nears Cap on the Price of Russian Oil

Diplomats from Poland and its neighbors in the Baltic Sea said they would also like to see the price cap come with commitments for sanctions that would target still-protected European trade with Russia, such as diamonds and fuel for nuclear reactors.

The European Union embargo on Russian oil that kicks in on Dec. 5 also includes a ban on European services to ship, finance or insure Russian oil shipments to destinations outside the bloc, a measure that would disable the infrastructure that moves Russia’s oil to buyers around the world.

To implement the price cap, these European shipping providers will instead be permitted to transport Russian crude outside the bloc only if the shipment complies with the price cap. In other words, it will be left up to them to ensure that the Russian oil they are transporting or insuring has been sold at or below the capped price; otherwise, they would be held legally liable for violating sanctions.

These shipping industries at the center of enforcing the price cap remain in the dark about the price and other details about how the cap will work. The maritime insurance industry, which has been skeptical about the idea from the start, said it would do its best to comply.

Lars Lange, the secretary general of the International Union of Marine Insurance, an industry association based in Germany, said that wherever the price is set, providers would make certain that insurance “is only granted for shipments below this price per unit.”

Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said that the G7 allies appear to have different priorities in setting the price cap. The United States has been focused on keeping Russian oil on the market, while the European Union wants to starve Russia of as much revenue as possible.

A delay in setting a price could disrupt the flow of Russian oil as the deadline approaches.

“The longer it is before there’s a price released, the greater the risk is that more oil temporarily comes off line because buyers will wait and see,” Ms. Ziemba said.

Article source: https://www.nytimes.com/2022/11/22/business/russia-oil-price-cap.html