According to this pricing mechanism, if the price of crude oil sold by Russia to a third country is higher than the upper limit, enterprises of the European Union and the Group of Seven will be prohibited from providing insurance and financial services for Russian crude oil transportation. The EU also plans to review the operation of the pricing mechanism every two months to cope with market changes and ensure that the price ceiling is at least 5% lower than the average market price of Russian petroleum products.
Why is it 60 dollars/barrel?
The price ceiling is the latest link in the chain of western sanctions against Russia and the core measure. However, there are serious differences within the EU around what level the price limit standard should be set.
G7 first proposed to limit the price to $65 to $70 per barrel, which was considered "too generous" by Poland and Baltic countries. They proposed to limit the price to $30 a barrel or even lower. However, this idea was opposed by Greece, Cyprus and Malta, which have huge shipping businesses, and they demanded that the price be limited to 70 dollars per barrel.
The final stage of the negotiations lasted more than 24 hours. After difficult negotiations, on February 2, 65438, the European Union finally reached an agreement on the export price limit of seaborne oil to Russia, and 27 member States, including Poland, agreed to limit the price to 60 dollars per barrel. Estonian Prime Minister Kaya Karas said that although Ireland wants a lower ceiling, $60 is the best result that can be achieved at present.
Zhao Chen, a researcher at the European Institute of China Academy of Social Sciences, pointed out that the price of $60 per barrel was lower than the previous estimate of $65 to $70 per barrel. Obviously, this is a compromise that the EU has to take after some games and compromises. While bridging internal differences, the EU also hopes to strike a delicate balance between limiting Russian oil export revenue and not reducing Russian exports to the global market.
What is the lethality to Russia?
So, can such a price-fixing move full of compromise meet the expectations of the United States and Europe? Public opinion is generally skeptical about this.
Simone Tagliapietra, an energy policy expert at the Bruggaier Institute, a Belgian think tank, said that $60/barrel is close to the recent market price of Russian Ural crude oil and will not have much impact on Russian finance. The British "Economist" magazine pointed out that the "price limit order" looks smart, but Russia can use non-western tankers and insurance companies that are not affected by the price limit order.
In Zhao Chen's view, on the one hand, the European Union introduced price-fixing measures to expand the scope of energy attack on Russia, so that it could not obtain more crude oil export income and use it for the conflict between Russia and Ukraine. At the same time, the EU also aims to ensure the stability of oil import price fluctuations and safeguard its own economic interests.
"But for whatever purpose, the actual effect will be greatly reduced." Zhao Chen pointed out that from the price factor, according to the estimation of the International Monetary Fund, the breakeven price of Russian oil production cost is about 30 to 40 dollars per barrel. At present, the trading price of Ural crude oil shipped by Russia to parts of Europe has fallen below $60 per barrel, far lower than the price of $85 per barrel in London Brent crude oil futures. Therefore, despite the western price ceiling, Russia still has room for profit, at least in the short term.
Zhao Chen also pointed out that compared with before, the attitude of the EU has shown signs of softening. According to the previous ban, the EU will stop importing Russian crude oil from February 5, 65438, and the EU will completely ban the provision of services to Russian tankers. However, the latest price cap has relaxed restrictions and allowed EU companies to provide services for Russian tankers that comply with the price cap. In addition, the EU also granted a 45-day transition period for the price ceiling, and said that only "intentionally" transporting Russian crude oil exceeding the price ceiling would be punished by a 90-day embargo.
Zhao Chen said: "The sanctions against Russia's oil price restrictions have been raised very high, but they have fallen gently, but this has opened the back door for Russia's oil embargo." .
What is in Russia's "toolbox" of counter-measures?
The EU has played its own card, and Russia's response is uncompromising, vowing to fight back.
Russian Presidential Press Secretary peskov reiterated on the 3rd that Russia will not accept the western oil price ceiling, and the Kremlin is evaluating the current situation and will take action after a quick analysis.
Russian Deputy Prime Minister Alexander Novak also said on the 4th that Russia's attitude towards the "oil price ceiling" policy has not changed, and even if production is reduced, it will not accept the "price limit order" for Russian oil. At the same time, he also accused the western practices of grossly interfering in the market and violating all the rules formulated by the WTO.
Zhao Chen said that Russian political considerations take precedence over economic considerations, so it is bound to show a tough attitude towards the "price limit order". This also means that Russia will make two preparations for this. On the one hand, it will adjust the direction of energy export and find more new crude oil sales places from the demand side. In fact, Russia has long planned ahead. According to the data of the International Energy Agency, since May, Russian oil transportation to western countries has increased by 2.2 million barrels per day, of which two thirds have been transferred to China, India and Turkey. By the end of this year 10, India has become the largest buyer of Russian seaborne oil.
At the same time, in order to break through the blockade, Russia is still establishing its own independent system, and the buyer can arrange insurance by Russian entities, which will largely avoid sanctions.
Zhao Chen further pointed out that in addition to reducing production and oil exports to EU countries, Russian countermeasures also include liquefied natural gas (LNG), which will undoubtedly aggravate the energy crisis in European countries.
What will happen to the west?
OPEC+also expressed dissatisfaction with the uncertainty brought by the "price limit order" to the market. Reuters quoted several sources as saying that several OPEC+members believed that this anti-market measure might eventually be used by the West against any producer.
Indonesian Finance Minister Muriani has made the same point before. She said that Saudi Arabia and the Organization of Petroleum Exporting Countries decided to drastically cut oil production in order to prevent the United States from "using commodity prices as geopolitical goals", because once this precedent is set, it will aggravate global economic anxiety, and no one knows who the West will be next.
OPEC+also held a meeting the day before the "price limit order" came into effect, and decided to maintain the production reduction target set by the 33rd ministerial meeting, that is, to reduce production by 2 million barrels per day on the basis of the output in August. In a statement issued after the meeting, OPEC+said that the decision to cut production was "purely based on market considerations" and was "the correct and necessary way to stabilize the global oil market".
Zhao Chen noticed that the relevant meetings were usually held on weekdays, but this meeting was arranged on the weekend before the western countries imposed the "price limit order" on Russian oil, which made the meeting look "unusual", and the representatives who advocated increasing production before also formed a * * * understanding that now is not a good time to increase oil production.
"This round of game between crude oil suppliers and demanders will eventually bring back the EU and G7 countries. Compared with natural gas, the oil market is more globalized. If the European natural gas crisis repeats itself in this market, the scope will be wider, and not only the EU countries will have a hard winter, but also the recovery of the world economy will be dragged down, "Zhao Chen said.