European Union member countries have agreed to a $60-per-barrel price cap on Russian oil in a bid to weaken the Kremlin’s ability to wage war in Ukraine, though Moscow has said the move is meaningless as it plans to keep charging buyers regular prices or cut them off.
After a last-minute flurry of negotiations, the EU’s rotating presidency, currently held by the Czech Republic, said in a statement that “ambassadors have just reached an agreement on price cap for Russian seaborne #oil.”
Poland, one of the holdouts that pushed for a lower cap, relented and agreed to the $60 cap, according to Poland’s Ambassador to the EU Andrzej Sados.
The decision must still be officially approved with a written procedure but is expected to clear that formal hurdle over the weekend, Sados said.
Kaja Kallas, the prime minister of Estonia, an EU member state that feels particularly threatened by Russia’s military moves in the region, hailed the price cap agreement.
“Crippling Russia’s energy revenues is at the core of stopping Russia’s war machine. I engaged personally in the negotiations as drying up Russian resources to wage war is an existential matter to us,” she added.
Last week, the European Commission recommended capping Russian oil prices at $65–70 per barrel, but Poland and the Baltic countries—including Estonia—came out in opposition, pushing for a lower cap.
Kallas estimated that, for every dollar lower on the cap, Russia would lose around $2 billion in oil revenues.
“It is no secret that we wanted the price to be lower. Our experts estimate that a price between 30-40 dollars is what would substantially hurt Russia. However, this is the best compromise we could get today,” she said.
Besides agreeing on the price cap, the agreement also includes provisions to review the cap level in the future, Kallas said.
Moscow Threatens to Penalize Countries Backing Price Caps
A day prior, as representatives of EU countries were in the final stretch of talks, the Kremlin said it would ignore whatever cap would finally ensue and negotiate prices directly with buyers.Lavrov also restated the Kremlin’s position that Russian energy companies would not supply oil to any country that backed the price cap, saying that Russia “will not be supplying oil to the countries who would follow the lead of dictators.”
The price cap has also faced criticism from other sources.
Former Treasury Secretary Steve Mnuchin told CNBC during a panel discussion in November that the Russian oil price cap was “not only not feasible, I think it’s the most ridiculous idea I’ve ever heard.”
Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels, said that a $ 60-per-barrel cap “will almost go unnoticed” by Russia because it would be close to a price point at which Russian oil is already selling.
“Up front, the cap is not a satisfying number,” Tagliapietra said, but it would prevent the Kremlin from making bigger profits if oil prices suddenly shoot higher.
The cap is likely to take effect at the beginning of next week if it clears the final written protocols over the weekend. That coincides with when the EU will impose a boycott on most Russian crude, with the twin measures having an uncertain impact on global oil prices as concerns over lost supply collide with fears about lower demand from a global economic slowdown.
