The exclusive G7 alliance agreed to fix a fixed price for Russian oil supplies

WASHINGTON/LONDON, Nov 4 (Reuters) – The Group of Seven rich nations and Australia have agreed to set a fixed price when finalizing a price cap on Russian oil later this month, sources said on Thursday.

US officials and G7 nations have been in intense talks in recent weeks over an unprecedented plan to put a price cap on seaborne oil exports, scheduled to take effect on December 5, to ensure EU and US sanctions aimed at reining in Moscow’s economy. Its ability to finance its aggression against Ukraine has not deterred the global oil market.

“It has agreed that the price ceiling will be a fixed price that will be reviewed regularly rather than an index discount,” said a coalition source, who was not authorized to speak publicly. “This will increase market stability and facilitate compliance. Reduce the burden on market participants.”

Initial pricing has not been set, but will be in the coming weeks, multiple sources said. The alliance partners agreed to regularly review the fixed price and revise it as needed, the source said, without divulging details.

Marking the price at a discount to some index would have led to higher volatility and potential price volatility, the source added.

The alliance worried that Brent floating below the international benchmark would help Russian President Vladimir Putin game the mechanism by cutting supply, said a second source with knowledge of the discussions.

Russia, one of the world’s biggest petroleum producers, could benefit from Putin’s floating price system if Brent rises due to oil cuts. The disadvantage of an agreed fixed price system is that it will require more meetings of the coalition and the bureaucracy to review it regularly, the source said.

See also  China to ease COVID restrictions after week of historic protests

U.S. Treasury Secretary Janet Yellen and other G7 officials argue that the price cap, which begins Dec. 5 on crude and Feb. 5 on oil, would squeeze funds for Russia without cutting supplies to consumers. Russia has said it will refuse to export oil to countries that impose price caps.

Shipping services are keen to see more details about the G7 plan, which will come into effect in a month.

A fixed price ceiling would allow insurers to change contracts with greater confidence and initiate new contracts without fear of price adjustments by countries that buy Russian oil, which could expose insurers to economic sanctions.

There was no immediate comment from the Treasury or the embassies of coalition members, which include the G7 rich nations, the European Union and Australia.

Separately, The Wall Street Journal reported on Friday that the United States and its allies had agreed to more details on how Russia would face a price ceiling on oil sales.

Each cargo of seaborne Russian oil is subject to a price cap only when it is first sold to a buyer on land, the countries decide. Reuters could not immediately verify the report, citing people familiar with the matter.

Reporting by Andrea Shalal and Timothy Gardner in Washington and Noah Browning in London; Editing by Heather Timmons and Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published. Required fields are marked *