Going against allies desire, US hesitant to lower Russia oil price cap

By Al Mayadeen English
Source: Bloomberg
19 Jan 20:32
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The Bloomberg report says that despite some EU countries pushing for the decision, it will not likely go through unless supported by the US.

Image illustrating an oil tap behind it the flag of the European Union (L) and the Russian flag (R)

Bloomberg revealed on Thursday that the US is hesitant to approve a lower price cap on Russian oil, despite some EU countries urging for directing further cuts to Russia's energy profits.

According to the report, citing people with knowledge on the matter, Washington will review the price cap on Russia's crude oil only after the G7 adopts price caps on Russian oil derivatives, such as diesel.

Earlier in December, the G7 nations and Australia adopted a price cap of Russian crude oil of $60 per barrel, which includes a price review mechanism that will keep the price cap at 5% below the market value.

As a result of the price cap decision, companies would be prohibited from providing shipping and insurance, brokering, and financial assistance, which facilitates the transportation of Russian oil unless it sells below the agreed threshold, which, in the case that Russia sells at price cap, would theoretically enable countries to profit on the difference between Russia's oil price and world market prices.

Ukrainian President Volodymyr Zelensky commented on the decision by saying it is not "serious" and "quite comfortable" for Moscow.

Baltic nations also expressed opposition to the idea that a price cap should be set above $50 per barrel, a Politico report revealed last December.

US diplomats negotiated with Baltic officials to convince the Visegrad Group, which is composed of the Czech Republic, Hungary, Poland, Slovakia, and the Baltic nations to agree to the amount of $60.

Poland was particularly staunchly opposed to the price cap being set this "high" trying to hold out for a lower level of $30 before finally agreeing to the $60.

Some European countries, in particular Poland and Estonia, have advocated for a lower price cap, while others have expressed concerns about the economic impact of such a move, the report said then.

Bloomberg added that the oil price cap is expected to be reviewed by the EU next week.

A G7 official told the news site that if Washington does not support lowering the price cap, being the leading force behind the decision, it is unlikely to pass.

The change would need a unanimous vote in favor, the report noted.

Russia had pledged to stop exporting its oil to countries that would apply price caps on its oil.

Meanwhile, those who violate the price cap on Russian oil exports will suffer consequences under the domestic law of the jurisdictions enforcing the quota, according to US Deputy Treasury Secretary Wally Adeyemo.