The United States is asking allies in the Western coalition not to rush to revise the threshold for the current price ceiling for Russian oil and wait until similar measures for Russian oil products come into force. The position of the United States does not find understanding among some members of the European Union, which, on the contrary, demand tougher sanctions on Russian oil and lower the price ceiling. Bloomberg writes about this, citing sources familiar with the negotiations and European diplomats.
Some European countries insist that the ceiling should be set at 5% below the current market price of Russian oil. Given that the Russian benchmark Urals is trading at $45.55, the ceiling should be set at about $43 per barrel. The US insists that it is unwise to change the bar in the current conditions, since sanctions on Russian oil products may affect the overall export of oil from Russia, so one should look at the effect of new restrictions before changing old ones.
A sharp reduction in the ceiling is insisted primarily on Estonia and Poland, who want a radical reduction in Russia's oil revenues. Their position could create some tension as the size of the ceiling is set by a broad coalition of countries that includes all EU members, all G7 members, including the US, Canada and Japan, as well as Australia. The ceiling can be changed only by a single decision, the agency notes. Discussion of the issue within the EU will begin next week. The market price for Brent crude is currently around $85.
The European authorities urge not to rush into new decisions and want to calculate all the risks, although they recognize the effectiveness of the introduced mechanism. Swedish Foreign Minister Tobias Bilström said that before taking decisions, the European Union intends to familiarize itself with a report on the consequences and risks of tightening the ceiling, as well as on the results of the work already done.
“It is clear that the restriction is working, and it is also clear that we are now seeing a decrease in prices. But I would like to see the report before making any final conclusions,” the minister said during the World Economic Forum in Davos, noting that before making any decision, the results of the mechanism should at least be discussed with colleagues.
In addition to the issue of threshold oil prices, at the same meeting the parties intend to discuss limit values for Russian oil products. The principle of operation of the mechanism will be similar to that used for sanctions against Russian oil. Experts have previously noted that for Russia, sanctions against oil products are even more painful in terms of revenue than oil, as they can undermine the high-tech industry and lead to an increase in crude oil exports, which again will affect oil prices.
At the moment, experts from the Finnish Center for Energy and Clean Air Research CREA estimate losses from oil sanctions at $180 million per day, and together with sanctions against petroleum products, at $280 million per day. Russia, on the other hand, is trying to circumvent the restrictions in various ways: using its shadow fleet, as well as mixing its oil with other grades, but it is almost impossible to assess the effectiveness of these measures.