The Group of Seven wealthy nations and Australia have decided against adopting a floating rate when they finalize a price cap on Russian oil later this month, sources said on Thursday.
In order to prevent the EU and U.S. sanctions intended to restrict Moscow's ability to finance its invasion of Ukraine from squeezing the global oil market from taking effect on Dec. 5, U.S. officials and G7 countries have been engaged in intense negotiations in recent weeks.
“The Coalition has agreed the price cap will be a fixed price that will be reviewed regularly rather than a discount to an index," said a coalition source, who was not authorized to speak publicly. "This will increase market stability and simplify compliance to minimize the burden on market participants.”
Although the initial price hasn't been decided upon, multiple sources indicated that it will be in the upcoming weeks. Without going into further detail, the source said that the coalition partners had agreed to review the fixed price on a regular basis and make adjustments as necessary.
According to the source, there would have been too much volatility and potential price swings if the price had been set as a discount to some index.
According to a second source with knowledge of the discussions, the coalition was concerned that a floating price set below the Brent international benchmark might allow Russian President Vladimir Putin to manipulate the system by reducing supply.
Putin might benefit from a floating price system because, if Brent rose as a result of a reduction in oil from Russia, one of the world's largest producers, the price for oil in his nation would also rise. The coalition and bureaucracy will need to meet more frequently to review the agreed fixed price system, according to the source.
The price cap, which will take effect on December 5 for crude and February 5 for oil products, is intended to limit funding to Russia without reducing supply to consumers, according to U.S. Treasury Secretary Janet Yellen and other G7 officials. Russia has declared that it will stop supplying oil to nations that impose price caps.
The G7 plan, which is set to go into effect in a month, is eagerly anticipated by the shipping industry.
A consistent price cap might make it easier for insurers to renew contracts and start new ones because they wouldn't have to worry about the price being changed by the nations that import Russian oil, which might have put them at risk of sanctions.
Treasury and the embassies of coalition members, which include the G7 wealthy nations, the European Union, and Australia, were unavailable for comment right away.
Separately, The Wall Street Journal reported on Friday that the US and its allies had reached an agreement on additional specifics regarding which sales of Russian oil will be subject to the price cap.
The nations agreed that the price cap would only apply to each load of Russian oil traveling by sea when it is first sold to a customer on land. The report, which cited people with knowledge of the situation, was not immediately corroborated by Reuters.
(Source:www.livemint.com)
In order to prevent the EU and U.S. sanctions intended to restrict Moscow's ability to finance its invasion of Ukraine from squeezing the global oil market from taking effect on Dec. 5, U.S. officials and G7 countries have been engaged in intense negotiations in recent weeks.
“The Coalition has agreed the price cap will be a fixed price that will be reviewed regularly rather than a discount to an index," said a coalition source, who was not authorized to speak publicly. "This will increase market stability and simplify compliance to minimize the burden on market participants.”
Although the initial price hasn't been decided upon, multiple sources indicated that it will be in the upcoming weeks. Without going into further detail, the source said that the coalition partners had agreed to review the fixed price on a regular basis and make adjustments as necessary.
According to the source, there would have been too much volatility and potential price swings if the price had been set as a discount to some index.
According to a second source with knowledge of the discussions, the coalition was concerned that a floating price set below the Brent international benchmark might allow Russian President Vladimir Putin to manipulate the system by reducing supply.
Putin might benefit from a floating price system because, if Brent rose as a result of a reduction in oil from Russia, one of the world's largest producers, the price for oil in his nation would also rise. The coalition and bureaucracy will need to meet more frequently to review the agreed fixed price system, according to the source.
The price cap, which will take effect on December 5 for crude and February 5 for oil products, is intended to limit funding to Russia without reducing supply to consumers, according to U.S. Treasury Secretary Janet Yellen and other G7 officials. Russia has declared that it will stop supplying oil to nations that impose price caps.
The G7 plan, which is set to go into effect in a month, is eagerly anticipated by the shipping industry.
A consistent price cap might make it easier for insurers to renew contracts and start new ones because they wouldn't have to worry about the price being changed by the nations that import Russian oil, which might have put them at risk of sanctions.
Treasury and the embassies of coalition members, which include the G7 wealthy nations, the European Union, and Australia, were unavailable for comment right away.
Separately, The Wall Street Journal reported on Friday that the US and its allies had reached an agreement on additional specifics regarding which sales of Russian oil will be subject to the price cap.
The nations agreed that the price cap would only apply to each load of Russian oil traveling by sea when it is first sold to a customer on land. The report, which cited people with knowledge of the situation, was not immediately corroborated by Reuters.
(Source:www.livemint.com)
