{"id":9588,"date":"2022-12-21T16:17:52","date_gmt":"2022-12-21T16:17:52","guid":{"rendered":"http:\/\/lonecandle.com\/?p=9588"},"modified":"2022-12-21T16:17:52","modified_gmt":"2022-12-21T16:17:52","slug":"what-to-know-about-the-60-price-cap-the-plan-to-limit-russias-oil-revenues","status":"publish","type":"post","link":"https:\/\/lonecandle.com\/?p=9588","title":{"rendered":"What to know about the $60 price cap, the plan to limit Russia\u2019s oil revenues"},"content":{"rendered":"\n

\n\n“These are some of the biggest sanctions<\/a> to date, as Europe \u2014 once the destination for about half of Russia\u2019s oil exports<\/a> \u2014 further weans itself off Russian energy. And Europe, along with the United States<\/a> and other major economies, like the United Kingdom, Japan, Canada, and Australia, have agreed to a maximum of $60 per barrel<\/a> on Russian seaborne oil, which means anyone who still wants to buy Russian oil has to pay that price or less, if it wants to ship cargo through operators or insurers based in the EU or other countries who signed on to this price cap.”
…
“There are a lot of unknowns, but this is a dramatic and unprecedented move by the US and its partners \u2014 especially given how dependent Europe was on Russian energy<\/a>. \u201cIf anyone told you a year ago that the EU is going to effectively eliminate its dependence on fossil fuel imports from Russia, over a period of a year, you would have thought they\u2019re a complete lunatic,\u201d said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air.<\/p>\n\n\n\n

It\u2019s true that Europe continued to buy<\/a> a lot of Russian oil and gas in the first half of the year, even after Russia invaded Ukraine. It\u2019s also true that Moscow itself cut off supplies of natural gas<\/a>, giving Europe little choice but to find alternatives. But even so, it\u2019s a real and rapid scrambling of a relationship, and the EU has largely<\/a> (if not perfectly<\/a>) been decreasing its Russian fossil fuel imports with the expectation of the ban<\/a> and other measures. Starting in February, the EU will also ban oil product imports from Russia<\/a>.” <\/p>\n\n\n\n

…<\/p>\n\n\n\n

“There are already caveats. Though Russia isn\u2019t exactly going to be transparent about this, the $60 price cap appears to be about what Russia is already selling its oil for<\/a>, which means Russia\u2019s oil revenues are unlikely to nosedive immediately. Some countries, like Poland, pushed for a much lower cap<\/a>, and Ukraine has also said this doesn\u2019t go far enough<\/a>. There are also some questions around enforcement, as shippers have to attest they are abiding by the price cap, and negotiators ended up weakening some of the penalties for violators<\/a>.<\/p>\n\n\n\n

But the US and its allies were trying to strike a balance through a mechanism that hasn\u2019t been attempted before. They wanted to avoid completely disrupting global oil markets while applying more pressure to Russia\u2019s oil profits. The cap is not firmly set, and is subject to a review every two months<\/a>. That means it \u2014 and its enforcement mechanisms \u2014 are likely to be tinkered with depending on how this all plays out.<\/p>\n\n\n\n

\u201cThis is about balance. It was never about not having any Russian oil on the market. It was about balancing supply and demand but also balancing the need to limit Mr. Putin\u2019s ability to profit. And again, we think that $60 per barrel will do that,\u201d National Security Council coordinator for strategic communications John Kirby said on a press call Monday.<\/p>\n\n\n\n

\u201cIt doesn\u2019t mean that that cap can\u2019t be adjusted going forward as we see the way it\u2019s being implemented, and as we see how the Russians might react to it,\u201d Kirby added.” <\/p>\n\n\n\n

…<\/p>\n\n\n\n

“Here\u2019s how it\u2019s supposed to work in practice: Any actor in a jurisdiction of the price-cap coalition that transports, insures, or finances the shipment of Russian oil by sea, can only do so if the price per barrel is $60 or less.<\/p>\n\n\n\n

The reason the coalition thinks it could work is because a lot of maritime operators, insurers, and reinsurers are based in Europe and the United Kingdom \u2014 or as Myllyvirta put it: \u201cThe two big things are Greek ships<\/a> and UK insurers<\/a>.\u201d That market domination would make it costly and cumbersome to insure your ship against an oil spill, say, or find an available tanker that doesn\u2019t fall under a jurisdiction that\u2019s adopted the price cap.”<\/p>\n\n\n\n

…<\/p>\n\n\n\n

“Russia has said it will not sell oil subject to the price cap, even if it has to scale back production. But this is easier said than done because Russia still needs oil buyers, like China and India, who now have a lot of leverage. \u201cAm I going to buy [oil] at anything above 60 bucks, knowing that\u2019s the only option Russia has? Are you going to do Putin a solid and say, \u2018No, I\u2019ll pay you $65, I\u2019ll pay you $70.\u2019 I\u2019m not sure why they would, especially because they have all the cards,\u201d Smith said.”<\/p>\n\n\n\n

…<\/p>\n\n\n\n

“Russia is under unprecedented financial and energy sanctions, especially for an economy of its size. Russia has weathered a lot of that pressure so far, and its energy and resource exports are a huge reason why. Still, sanctions are undoubtedly having an effect<\/a>. Russia\u2019s economy has shrunk<\/a>. Import bans on advanced technology are forcing Russian manufacturers to scale back features \u2014 no airbags in cars, for example<\/a> \u2014 because they can\u2019t get parts. That is also affecting Russia\u2019s ability to make advanced weapons<\/a>. And even if Russia was buoyed by its oil and gas sales, those are declining<\/a>, and Russia has been heavily taxing some of its oil and gas industries<\/a> to try to raise more revenues. That can\u2019t work forever, either.”<\/p>\n\n\n\n

…<\/p>\n\n\n\n

“there are still more sanctions to impose on Russia \u2014 we\u2019re not at the level of an Iran or a North Korea yet \u2014 but that would come with repercussions for the United States, Europe, and the rest of the world, all of which is struggling with inflation and rising food and fuel prices.”<\/p>\n\n\n\n

https:\/\/www.vox.com\/world\/2022\/12\/6\/23490654\/price-cap-60-russian-oil-european-union-ban-group-of-seven-united-states<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

“These are some of the biggest sanctions to date, as Europe \u2014 once the destination for about half of Russia\u2019s oil exports \u2014 further weans itself off Russian energy. And Europe, along with the United States and other major economies, like the United Kingdom, Japan, Canada, and Australia, have agreed to a maximum of $60 per barrel on Russian seaborne oil, which means anyone who still wants to buy Russian oil has to pay that price or less, if it wants to ship cargo through operators or insurers based in the EU or other countries who signed on to this price cap.”<\/p>\n

…<\/p>\n

“There are a lot of unknowns, but this is a dramatic and unprecedented move by the US and its partners \u2014 especially given how dependent Europe was on Russian energy. \u201cIf anyone told you a year ago that the EU is going to effectively eliminate its dependence on fossil fuel imports from Russia, over a period of a year, you would have thought they\u2019re a complete lunatic,\u201d said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air.
\nIt\u2019s true that Europe continued to buy a lot of Russian oil and gas in the first half of the year, even after Russia invaded Ukraine. It\u2019s also true that Moscow itself cut off supplies of natural gas, giving Europe little choice but to find alternatives. But even so, it\u2019s a real and rapid scrambling of a relationship, and the EU has largely (if not perfectly) been decreasing its Russian fossil fuel imports with the expectation of the ban and other measures. Starting in February, the EU will also ban oil product imports from Russia.” <\/p>\n

…<\/p>\n

“There are already caveats. Though Russia isn\u2019t exactly going to be transparent about this, the $60 price cap appears to be about what Russia is already selling its oil for, which means Russia\u2019s oil revenues are unlikely to nosedive immediately. Some countries, like Poland, pushed for a much lower cap, and Ukraine has also said this doesn\u2019t go far enough. There are also some questions around enforcement, as shippers have to attest they are abiding by the price cap, and negotiators ended up weakening some of the penalties for violators.<\/p>\n

But the US and its allies were trying to strike a balance through a mechanism that hasn\u2019t been attempted before. They wanted to avoid completely disrupting global oil markets while applying more pressure to Russia\u2019s oil profits. The cap is not firmly set, and is subject to a review every two months. That means it \u2014 and its enforcement mechanisms \u2014 are likely to be tinkered with depending on how this all plays out.<\/p>\n

\u201cThis is about balance. It was never about not having any Russian oil on the market. It was about balancing supply and demand but also balancing the need to limit Mr. Putin\u2019s ability to profit. And again, we think that $60 per barrel will do that,\u201d National Security Council coordinator for strategic communications John Kirby said on a press call Monday.<\/p>\n

\u201cIt doesn\u2019t mean that that cap can\u2019t be adjusted going forward as we see the way it\u2019s being implemented, and as we see how the Russians might react to it,\u201d Kirby added.” <\/p>\n

…<\/p>\n

“Here\u2019s how it\u2019s supposed to work in practice: Any actor in a jurisdiction of the price-cap coalition that transports, insures, or finances the shipment of Russian oil by sea, can only do so if the price per barrel is $60 or less.<\/p>\n

The reason the coalition thinks it could work is because a lot of maritime operators, insurers, and reinsurers are based in Europe and the United Kingdom \u2014 or as Myllyvirta put it: \u201cThe two big things are Greek ships and UK insurers.\u201d That market domination would make it costly and cumbersome to insure your ship against an oil spill, say, or find an available tanker that doesn\u2019t fall under a jurisdiction that\u2019s adopted the price cap.”<\/p>\n

…<\/p>\n

“Russia has said it will not sell oil subject to the price cap, even if it has to scale back production. But this is easier said than done because Russia still needs oil buyers, like China and India, who now have a lot of leverage. \u201cAm I going to buy [oil] at anything above 60 bucks, knowing that\u2019s the only option Russia has? Are you going to do Putin a solid and say, \u2018No, I\u2019ll pay you $65, I\u2019ll pay you $70.\u2019 I\u2019m not sure why they would, especially because they have all the cards,\u201d Smith said.”<\/p>\n

…<\/p>\n

“Russia is under unprecedented financial and energy sanctions, especially for an economy of its size. Russia has weathered a lot of that pressure so far, and its energy and resource exports are a huge reason why. Still, sanctions are undoubtedly having an effect. Russia\u2019s economy has shrunk. Import bans on advanced technology are forcing Russian manufacturers to scale back features \u2014 no airbags in cars, for example \u2014 because they can\u2019t get parts. That is also affecting Russia\u2019s ability to make advanced weapons. And even if Russia was buoyed by its oil and gas sales, those are declining, and Russia has been heavily taxing some of its oil and gas industries to try to raise more revenues. That can\u2019t work forever, either.”<\/p>\n

…<\/p>\n

“there are still more sanctions to impose on Russia \u2014 we\u2019re not at the level of an Iran or a North Korea yet \u2014 but that would come with repercussions for the United States, Europe, and the rest of the world, all of which is struggling with inflation and rising food and fuel prices.”<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[552,728,923,1218,1545,576,578,315,1001,226,227,311],"class_list":["post-9588","post","type-post","status-publish","format-standard","hentry","category-article-share","tag-conflict","tag-europe","tag-european-union","tag-gas","tag-invasion","tag-oil","tag-oil-price","tag-russia","tag-sanctions","tag-trade","tag-trade-war","tag-ukraine"],"_links":{"self":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/9588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9588"}],"version-history":[{"count":1,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/9588\/revisions"}],"predecessor-version":[{"id":9589,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/9588\/revisions\/9589"}],"wp:attachment":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}