After failing to reach an agreement on a price cap for Russian gas, the EU is set to resume talks on limiting the price of Russian crude on Friday night.
And, just as was the case for natural gas, the bloc has so far failed to agree on how strict the price cap should be or how it should be implemented. Countries such as Poland are opposed to the EU executive arm’s proposal to set a $65 per barrel limit, saying it was too generous to Russia while others like Greece don’t want to go below that level.
Indeed, Bloomberg has reported that currently, Russia’s premium grades are only selling for $52 per barrel, meaning the EU’s proposed level of $65-$70 would hardly have the desired effect.
It’s a reality that European Commission Vice President Valdis Dombrovskis has acknowledged, saying, “If you put the price cap too high, it doesn’t really bite. Oil is the biggest source of revenue for the Russian budget, so it’s very important to get this right so it really has an impact on Russia’s ability to finance this war,” he has told Bloomberg TV. First proposed by the US, the aim of the price cap is two-fold: to keep Russian oil flowing while also limiting Moscow’s revenue.
The diplomats will be hoping that talks on the cap actually succeed where recent plans to attempt to introduce price caps on natural gas prices across the bloc hit a dead-end after EU energy ministers on Thursday failed to reach an agreement amid deep divisions. Czech Industry Minister Jozef Sikela has, however, said that the ministers did manage to agree on other "important measures", including joint gas purchases, supply solidarity in times of need, and expediting the authorization process for renewable energy.
Sikela has also revealed that the ministers will meet again In December to try and work out their differences.
Earlier this week, the European Commission issued a statement whereby it declared what it called a “safety price ceiling” for gas prices set at 275 euros, or $283 dollars, per megawatt-hour.
By Alex Kimani for Oilprice.com
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