BRUSSELS: Talks between European Union (EU) nations on where to set a proposed Group of Seven (G7) price cap on Russian oil bogged down, as governments split over how to design the plan, according to people familiar with the matter.
The EU’s executive arm proposed a level of US$65 (RM297.34) a barrel, which Poland and the Baltic nations rejected as being too generous to Moscow, the people said. But several countries with major shipping industries, including Greece, don’t want to go below US$70 (RM320.22), the upper end of the range put forward by the EU earlier.
Ambassadors are scheduled for more talks to continue their discussions after some governments likely consult Washington, some of the people said. Hours of fruitless talks on Wednesday made clear that the bloc remained far apart on the price cap, which was first pushed by the United States, but a deal is still seen as in reach.
EU energy ministers are also set to meet soon to discuss measures to contain the price of natural gas.
“We’re looking for ways how this can work and how one can find a common basis.
“This is so that this can be implemented in an ideally pragmatic and efficient way, while at the same time avoiding that this could lead to excessive disadvantages for the countries of the EU,” German chancellor Olaf Scholz told reporters.
“But for my part, I want to say that I’m pretty confident that we’ll get this done soon,” he added.
A senior government official within the price-cap coalition also expressed confidence that EU governments would agree soon on a price. He added that such an accord would happen well ahead of the Dec 5 deadline when EU oil sanctions kick in.
The official added that the price being debated – around US$65 (RM297.34) a barrel – fit well with criteria already agreed to by the coalition of countries backing the plan, adding that the price could be adjusted over time if necessary.
At US$65 (RM297.34), the price cap would be well above Russia’s cost of production. Russia is already selling its crude at discounts, and a high cap would likely have minimal impact on trading.
The EU and G7 had originally hoped to sign off on the price cap level on Wednesday. The cap needs the backing of all EU member states to be approved.
Oil prices fell earlier Wednesday after Bloomberg reported the proposed price range. One reason traders appeared to shrug it off is that insurers and shippers will simply have to make sure the cargoes they carry were sold below the cap price.
If the cap comes in close to existing discount levels, Russia could claim it’s conducting business as usual.
“Russian oil currently trades at a significant discount compared to Brent, around US$65 (RM297.34) per barrel,” said Simone Tagliapietra, a senior fellow at the Bruegel think tank in Brussels. “Should the G7 price cap for Russian oil be set at a similar level, it wouldn’t do much harm to Russia.”
The aims of the price cap were always ambiguous. The United States wanted to make sure Russian oil kept flowing while also trimming Moscow’s revenue.
The EU sanctions initially were more focused on reducing revenue for Russian president Vladimir Putin’s war machine. The result of the hard-negotiated cap has been to soften the impact of the impending EU sanctions, which are set to take place soon. — Bloomberg