A complex effort by Ukraine’s allies to deprive Russia of billions of dollars in oil revenue by putting a cap on the price paid for its crude is reaching a crescendo this week.
European Union diplomats will meet on Wednesday to try to set that price after discussions with the United States and other Group of 7 industrialized nations, with two weeks to go before the cap is scheduled to take effect.
The diplomats’ meeting in Brussels will mark the last stage of implementing the policy that requires regulatory and logistical alignment in the complicated business of ferrying the fuel out of Russia to markets such as India and China.
The policy must be in place by Dec. 5, when the European Union’s near-total embargo on Russian oil begins, one of many actions the bloc has taken to hobble Russia’s economy and limit its ability to wage war in Ukraine.
The idea behind setting a price cap is to limit the revenue Russia can make from its oil exports while also averting a shortage of the fuel, which would force prices up and compound a cost-of-living crisis around world.
The way the G7 nations want to make this work is by putting the burden of implementing and policing the price cap on the businesses that help sell the oil: global shipping and insurance companies, which are mostly based in Europe.
This is why the regulatory framework to enforce this measure needs to be adopted in Europe as well as other G7 members such as the United States, Britain and Japan, which also host companies active in transporting or insuring Russian oil.
E.U. ambassadors will need to approve the price per barrel by unanimity. The decision is expected on Wednesday, several diplomats said, but there could be delays.
Because the cap would require a change in the European Union’s sanctions against Russia, unanimous consent among the 27 E.U. nations on the price is needed.
Seven senior E.U. diplomats said there was political support for the policy, but opinions differed on where the price should be set. They spoke on condition of anonymity because they did not want to upset ongoing talks.
The idea is to set the price high enough over the cost of extracting oil to incentivize the Russians to continue selling, but low enough to make a meaningful dent in the profits they earn.
The cost of extraction per barrel in Russia is estimated between $12 and $20; Russian oil recently traded at nearly $70 per barrel on the global markets. Treasury Secretary Janet L. Yellen and several European diplomats have cited $60 per barrel as a potential price. But E.U. diplomats from nations closer to Ukraine who take an even stauncher pro-Ukraine line have indicated they would prefer a lower price.
The United States is letting the European Union take the lead in determining a price that can win approval there. A Treasury spokesman said that the United States has no plans to privately propose a price to European partners.
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