Poland and Baltic States Demand $20
Greece and Malta Oppose Below $70
Negotiations Expected to Conclude Before the 5th of Next Month
[Asia Economy Reporter Lee Ji-eun] As the Group of Seven (G7) and the European Union (EU) discuss a price cap on Russian crude oil, negotiations are reportedly facing difficulties due to differing opinions among the countries.
Bloomberg reported on the 23rd (local time) that the EU Commission proposed limiting the crude oil price cap to $65-$75 per barrel, but Eastern European countries bordering Russia, such as Poland and Lithuania, rejected this. They argue that the cap should be lowered to around $20, close to the production cost of crude oil.
On the other hand, countries with significant shipping industries, such as Greece and Malta, do not want crude oil prices to fall below $70. Once the price cap is decided through negotiations, the G7 and EU plan to prohibit services such as transportation and insurance for crude oil exported above the cap. These countries are concerned that if the price cap is set too low, the lack of insurance coverage will reduce profitability.
Bloomberg stated that EU ambassadors are scheduled to hold additional talks on the price cap negotiations on the afternoon of the 24th, and if no agreement is reached, discussions may continue until the following day.
However, German Chancellor Olaf Scholz expressed confidence in concluding the negotiations during a press meeting that day, saying, "We are looking for an ideal and practical way to carry out consultations while avoiding excessive disadvantages to EU countries."
A senior government official from a country advocating for the price cap also told Bloomberg that "an agreement is expected before the EU's sanctions on Russian crude oil imports take effect on the 5th of next month," and that the price is being discussed around $65.
However, Bloomberg pointed out that negotiators believe the proposed price cap level will not significantly impact the Russian economy. Russia's crude oil extraction costs are currently estimated to be between $12 and $20 per barrel, and the market recently has been trading around $65 per barrel.
Bloomberg noted, "Russian crude oil is traded at a significant discount compared to Brent crude," and "if the price cap is set high, it will not cause much harm to the Russian economy."
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