Shelving, at least temporarily, by Ukraine’s allies to the periodic reviews of the maximum limit on the price at which Russia sells its gigantic oil production. The information, reported by the Reuters agency, means that the West is being completely oblivious to the recent change in tone in the market: after its recent increase in prices, most of the crude oil sold by the Eurasian country is already clearly above the limit price at which the Eurasian giant can sell its crude to the rest of the world: $60 a barrel.
Since the ceiling on the price of Russian oil that reaches the rest of the world began to be designed —in the US and in the EU it is directly prohibited—, the West debates how much to tighten the rope: if they opted for a prudent figure, the risk was that Russia continue to enter what is necessary to finance the war; if he took a more ambitious position, the amount of oil in circulation in the world could fall drastically and prices, it was feared, would go through the roof. Half a year later, the balance leans towards caution: despite the recent rise in the price and despite their commitment to review it periodically, the G-7 have no intention of doing so in the short term. A lowering of that threshold would mean increasing the pressure on Moscow, but it does not seem that this will be the case.
In August, Ural oil – the Russian benchmark – averaged $74 a barrel, already well above the ceiling. And that figure still does not reflect the growth of recent days, after both Russia itself and Saudi Arabia announced an extension in their supply reduction until the end of the year. One more indicator that the sanction may be falling short is the price gap between European Brent and Ural crude – the true measure of the size of the blow to Moscow – which has also narrowed rapidly. “Historically, before the war, both mixtures were practically at parity. Last year, with the cap and the sanctions, the discount reached 40 dollars per barrel and today we are around 15 dollars. That is thanks to the cap, although it is being less relevant than initially expected,” Jorge León, vice president and head of oil analysis at the consultancy Rystad Energy, points out by phone.
In December, when the cap came into force – to which another one on fuel and other crude oil derivatives was added three months later – the EU countries committed to reviewing it bimonthly, adjusting it both upwards and downwards. should market conditions change. The rest of the signatories – the US, Canada, Japan and the United Kingdom (all members of the G-7) and Australia – instead chose not to set any periodicity for this review and limited themselves to doing so “when appropriate.”
“In June or July there were conversations to carry out a review, or at least talk about it, but it was never done formally,” underlines a diplomatic source consulted by the British news agency. According to these sources, although some EU countries were in favor of lowering the threshold to add pressure on Russia’s shoulders, the US and the rest of the G-7 members are little or not at all willing to introduce changes. Within the Twenty-Seven itself, sensitivities are also different: Poland and the Baltics have always been more in favor of tightening the screws on the Kremlin, while the rest have maintained a somewhat more lax position to avoid a boomerang effect against them. in the form of higher prices for crude oil and fuels that it imports.
In March, when the first and – to date – last round of talks to review the cap took place, the resistance of the US and the rest of the countries outside the EU was enough to keep it at $60. At that time, Brent was around 75 dollars per barrel, compared to 90 today; and the differential between the European and Russian references was 26 dollars, far from the current 17.
Russian exporters have been looking for ways to circumvent the sanctions for months, with – among other things – a shadow fleet of oil tankers and an increase in their sales to large Asian countries. That, together with the allies’ refusal to review the threshold, has made the sanctions less effective. “Ural crude oil has been above the ceiling for five weeks, and it has not been noticed,” settles León. The reason: “It has developed its national fleet of oil tankers to be able to transport that crude oil, especially to Asia, and it has gotten Chinese and Indian companies to participate in the transportation of that crude oil. And that makes the cap less effective, because they are being able to export their crude oil without resorting to European services, especially British and Greek ones.”
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