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EU, G-7 Wait on Poland to Advance Russian Oil-Price Cap

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BRUSSELS—The European Union and the Group of Seven advanced economies are awaiting word on whether Poland will agree to a $60-a-barrel price cap on Russian oil that is supposed to take effect Monday.

The cap is part of the West’s attempt to squeeze the Kremlin’s oil revenues while keeping global supplies steady and avoiding an increase in prices. It has been crafted to try to allow Russian oil to sate global markets without Moscow getting the full benefit of its sale.

Polish ministers have been consulting for 24 hours on the latest proposal from the EU’s executive body, but are yet to give an answer to Brussels. All 27 EU countries including Poland need to approve the cap. Once the bloc signs off, the cap level will need to be agreed by the G-7, as it races to set up the system by Monday, when an EU embargo on Russian seaborne crude imports kicks in.

The last-minute scramble on the cap, which the G-7 agreed to implement almost six months ago, underscores the difficulties in coming up with a workable mechanism, and the doubts in Europe about how effective it will be.

U.S. officials drove the proposal, worried that the EU oil embargo, combined with a European threat of cutting off insurance and other services for vessels shipping Russian oil, could send crude prices upward, generating fresh revenue for Russia.

Poland’s nationalist government had backed Ukraine’s call for a Russian price cap set far below the price at which Moscow is selling its oil, brushing aside concerns that a low price could persuade the Kremlin to cut supplies to the global market.

In recent days, Polish officials have reiterated that they support the price cap and don’t want to delay its implementation. But they have linked their signoff to the EU advancing a new package of sanctions on Russia and on a mechanism for lowering the price cap over time, a concession to which Brussels agreed Thursday.

Polish officials confirmed early Friday that consultations were continuing at home. Two European diplomats said they had been told there were disagreements among the three Polish ministries that have oversight of the price-cap system.

Under the system, companies shipping Russian oil outside of Europe would only be able to access EU insurance and brokerage services if they sell the oil at or under $60.

The price level would be reviewed every two months from mid-January. The EU says the aim would be to set the cap in future at least 5% below the price at which Russian oil is being sold.

On Thursday, oil prices rose after The Wall Street Journal reported that the European Commission had asked members to approve a $60-a-barrel cap on Russian crude. As of late morning Friday in London, futures contracts for Brent crude, the global oil benchmark, were down 0.2% at $86.69 a barrel. Equivalent contracts for West Texas Intermediate, the U.S. benchmark, also shed 0.2%, trading at $81.03 a barrel.

Russian oil sells at a steep discount from the Brent price. Argus Media, which assesses commodity prices, pegged the price of Russia’s Urals benchmark crude at about $48 a barrel in the Baltic port of Primorsk on Wednesday.

Write to Laurence Norman at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



BRUSSELS—The European Union and the Group of Seven advanced economies are awaiting word on whether Poland will agree to a $60-a-barrel price cap on Russian oil that is supposed to take effect Monday.

The cap is part of the West’s attempt to squeeze the Kremlin’s oil revenues while keeping global supplies steady and avoiding an increase in prices. It has been crafted to try to allow Russian oil to sate global markets without Moscow getting the full benefit of its sale.

Polish ministers have been consulting for 24 hours on the latest proposal from the EU’s executive body, but are yet to give an answer to Brussels. All 27 EU countries including Poland need to approve the cap. Once the bloc signs off, the cap level will need to be agreed by the G-7, as it races to set up the system by Monday, when an EU embargo on Russian seaborne crude imports kicks in.

The last-minute scramble on the cap, which the G-7 agreed to implement almost six months ago, underscores the difficulties in coming up with a workable mechanism, and the doubts in Europe about how effective it will be.

U.S. officials drove the proposal, worried that the EU oil embargo, combined with a European threat of cutting off insurance and other services for vessels shipping Russian oil, could send crude prices upward, generating fresh revenue for Russia.

Poland’s nationalist government had backed Ukraine’s call for a Russian price cap set far below the price at which Moscow is selling its oil, brushing aside concerns that a low price could persuade the Kremlin to cut supplies to the global market.

In recent days, Polish officials have reiterated that they support the price cap and don’t want to delay its implementation. But they have linked their signoff to the EU advancing a new package of sanctions on Russia and on a mechanism for lowering the price cap over time, a concession to which Brussels agreed Thursday.

Polish officials confirmed early Friday that consultations were continuing at home. Two European diplomats said they had been told there were disagreements among the three Polish ministries that have oversight of the price-cap system.

Under the system, companies shipping Russian oil outside of Europe would only be able to access EU insurance and brokerage services if they sell the oil at or under $60.

The price level would be reviewed every two months from mid-January. The EU says the aim would be to set the cap in future at least 5% below the price at which Russian oil is being sold.

On Thursday, oil prices rose after The Wall Street Journal reported that the European Commission had asked members to approve a $60-a-barrel cap on Russian crude. As of late morning Friday in London, futures contracts for Brent crude, the global oil benchmark, were down 0.2% at $86.69 a barrel. Equivalent contracts for West Texas Intermediate, the U.S. benchmark, also shed 0.2%, trading at $81.03 a barrel.

Russian oil sells at a steep discount from the Brent price. Argus Media, which assesses commodity prices, pegged the price of Russia’s Urals benchmark crude at about $48 a barrel in the Baltic port of Primorsk on Wednesday.

Write to Laurence Norman at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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