Ukraine considers the EU and G7 decision good, but would have liked a lower price ceiling.
The G7 group of leading industrialized countries, the EU and Australia have agreed on a price ceiling for Russian oil. The price cap is $60 per barrel and is set to go into effect on or shortly after Monday.
The Bank of Finland’s leading expert Laura Solanko estimates that the price ceiling will likely have some effect on Russia’s budget revenues. According to him, the significance of the decision is greatest at the level of principle.
– It is an enforcement measure like any other, and the effects will be seen in the longer term, says Solanko.
The $60 ceiling is a compromise, Solanko reminds. According to him, Russia has also anticipated the entry into force of the price ceiling and, for example, has already exported oil from the port of Koivisto below the amount determined by the price ceiling.
The G7 statement says the goal of the price cap is to prevent Russia from benefiting from a war of aggression in Ukraine, support the stability of global energy markets and minimize the spread of adverse economic effects of a war of aggression by Russia.
The G7 countries include the United States, Britain, Italy, Japan, Canada, France and Germany.
The price cap is scheduled to come into effect at the same time as the ban on the import of Russian oil comes into force in the EU next Monday.
Initially, the import ban applies to crude oil transported by sea from Russia to EU countries by tankers. The aim of the price ceiling is to make it harder to circumvent the import ban.
Ukraine: $30 would have been better
The representative of Ukraine has commented on the price ceiling decision by saying that the decision is good in principle and that it helps to destroy the Russian economy.
– However, 30 dollars would have destroyed the Russian economy faster, the assistant of the president of Ukraine Andriy Yermak said.
The US welcomes the decision and says the price cap will help limit Russian President Vladimir Putin’s ability to finance his “war machine”.
Russian oil exports are estimated to have shrunk only a little (you switch to another service) after the start of the war of aggression. According to the international energy organization IEA, Russian crude oil and oil products were exported in October only four percent less than before the start of the war.
Russia has found new markets, especially in India, China and Turkey.
Russia’s income from oil exports has also been inflated by the high price of oil, despite the fact that it has sold oil at a discount to, for example, China.
Read here Janne Toivonen previous analysis of what the oil price cap could mean for both buyers and sellers of Russian oil.
Sources: AFP, STT