Home » US-allies agreement: the ceiling on the price of Russian oil will only be on the first sale

US-allies agreement: the ceiling on the price of Russian oil will only be on the first sale

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US-allies agreement: the ceiling on the price of Russian oil will only be on the first sale

The United States and its allies have reached an agreement on which sales of Russian oil should be subject to the price cap, in an effort to define as soon as possible all the details of the sanctions that will take effect on December 5. The price cap, writes the Wall Street Journal, will be applied to the first sale to a buyer on the mainland: this means that subsequent sales of the same crude oil will not be subject to the price cap.

A key deal: It has been decided which Russian oil sales will be capped, trying to work out the details of the new sanctions program before it starts on December 5. The pro-American alliance has stipulated that any shipment of Russian oil transported by sea will only be subject to the price cap when it is first sold to a buyer on the mainland, which means that resales of the same oil will not have to fall within the limit. Intermediate Russian oil transactions that take place at sea must still fall within the limit. If a cargo of Russian oil has been refined to fuel such as gasoline, it can be re-marketed at sea without being subject to the cap. Under the price cap plan, the G7 and Australia are planning to prevent companies in their countries from providing key shipping services – such as insurance – for shipping Russian oil, unless the oil is sold. below a predetermined price. Since most of the world‘s maritime services are based in the G7 countries and the European Union, Western partners seek to impose de facto price limits at which Russia can sell part of its oil on the markets. What remains to be decided is how much to set this price cap. The idea is to agree on a figure in the coming weeks. However, the delay in the implementation of the plan has alarmed many operators in the oil sector for the risk that shipments of Russian crude oil at sea on 5 December could suffer further sanctions. The US Treasury Department has attempted to address these concerns, saying that Moscow black gold shipped before December 5 will be exempt from the maximum price cap if discharged at its destination by January 19. Russian officials have threatened they say they are willing to cut supplies, but the Americans remain confident enough that the federation will not interrupt a supply chain so essential to its economy, especially in a state of crisis like the current one. The Russians need to sell oil as much as other countries need to buy it. Oil operators have asked the US Treasury Department if the price cap should only be applied to the first sale of crude oil, and the new parameters could make it easier for intermediaries to buy Russian oil below the maximum level before reselling it. The United States has tried to make the price cap a relatively light burden on the banks, insurance companies, shippers and traders that help make Russian oil available on global markets. In addition to cutting profits Russia makes from oil sales, the US hopes to keep global markets stocked with Russian fuel to keep energy prices stable. Foreign partners are also hard at work enforcing the program. The UK Treasury, led by Jeremy Hunt, introduced a law on Thursday that sets the stage for implementing the price cap. London is a particularly important hub for global marine insurance. “This new measure continues to tighten Putin’s war machine, making it even more difficult for him to profit from his illegal war,” Chancellor of the Exchequer Jeremy Hunt said in a statement Thursday. The Russian crude oil price cap will take effect on December 5th, while two separate price limits for refined Russian petroleum products will kick in on February 5th.

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