According to people familiar with the talks, the United States and its allies are attempting to reach an agreement on a level for a price cap on Russian oil as soon as Wednesday, with officials discussing setting it at around $60 per barrel as the group rushes to put the plan in place before December 5.
The price restriction, which could be set as high as $70, lies at the heart of the West’s plans to censure Russia for its invasion of Ukraine. After encountering delays this fall as the Group of Seven advanced democracies attempted to iron out the last aspects of the difficult plan, the experimental sanctions design is expected to commence on December 5.
The ambassadors of the 27 European Union member states are expected to meet on Wednesday to try to reach an agreement on a price. The group must reach an agreement on the price restriction unanimously, which officials say will be tough. The G-7 hopes to ratify the cap in tandem with the EU.
The strategy, backed strongly by Treasury Secretary Janet Yellen, aims to reduce Russian energy export revenue while averting an increase in oil prices when a European embargo on Russian oil imports takes effect early next month. Despite European reservations at the time, the G-7 first agreed on a price cap for oil in June, following Russia’s February 24 invasion of Ukraine.
Under the penalties, the G-7, EU, and Australia will all prohibit the supply of naval services for Russian oil exports unless the commodity is sold below a certain price. Western countries hope to use their dominance over much of the world’s maritime insurance, banking, and shipping services to impose their will on Russia’s oil sales.
The EU has already given backing in principle to a mechanism for approving the price cap, but there were several pending issues that member states needed to agree upon. One was the price of the oil cap, which remains contentious. A number of countries, including Poland and Lithuania, have been urging for a far lower cap set around the price of production, which Polish officials have said is around $20 a barrel.
The EU was also under intense pressure from Washington and London to change a provision in its legislation that would have barred vessels that exceeded the price cap from getting EU oil services such as brokerage or insurance.
According to those familiar with the plan, the ban on warships would now be time-limited, thanks to a deal reached by US and EU authorities. It will also be based on proof that the vessel purposefully exceeded the price cap.
For the EU to proceed with the price cap, Greece, Malta, and Cyprus, all of which have substantial maritime industries, will need to sign off on the compromise.
The price cap will take the place of Europe’s plan to prohibit the financing and insurance of Russian oil shipments, which is slated to go into effect on December 5. Because US officials are concerned that the sanctions will shut Russian oil off from global markets, driving up energy costs, they want to implement the price cap by that date.