WASHINGTON: The Group of Seven rich nations, the European Union and Australia have set price caps for Russian diesel and other refined petroleum products to keep markets supplied while limiting Moscow’s revenues when an EU embargo kicks in.
The EU measure, which takes effect on Feb. 5, follows an earlier EU embargo on Russian seaborne crude, for which the bloc, the G7 and Australia set a crude price cap at $60 per barrel from Dec. 5.
The coalition aims to punish Russia over its invasion of Ukraine almost a year ago by depriving it of revenue from its oil and products exports, while averting a surge in prices that could occur if Russian oil stopped flowing to global markets.
Envisioned as a safety valve from the EU ban, which covers insuring and shipping Russian oil and therefore risks snarling the entire global trade, the price cap mechanisms would allow such services provided they occur below an enforced price.
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Below are the main elements of how the embargo on Russian refined products is supposed to work:
PRICE CAP
The coalition on Friday said it had set the price caps at $100 per barrel on products that trade at a premium to crude, principally diesel, and $45 per barrel for products that trade at a discount, such as fuel oil and naphtha. That was in line with the levels suggested by the European Commission.
The price caps on petroleum products will be implemented on Feb. 5 or “very soon thereafter,” the coalition said in a statement. Participating countries said they would include “time-limited exceptions” for products that are loaded onto a vessel prior to Feb. 5.
