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EU seeks split between Russian oil price cap agreement

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(Bloomberg) — European Union diplomats are optimistic they could reach a price cap on Russian oil exports as early as Thursday, according to people familiar with the matter, despite sharp divisions over the plan.

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Poland on Wednesday rejected the EU executive’s proposed price of $65 a barrel as too soft for Moscow, while Greece, whose shipping industry carries much of the oil, will not go below $70. Wanted.

Setting the ideal price – high enough to maintain Russian oil flow and prevent a price hike, low enough to reduce funding for Russia’s war in Ukraine – is one of the factors that shaped the Group of Seven guided plan. There is the last major hurdle in the months-long process. , which has been taken over by the US authorities.

Some said the ambassadors have scheduled more talks on Thursday evening to continue their talks. Major new European sanctions began on December 5, making it urgent to push for prices and other details.

It has also been engulfed in a wider battle in the European Union over how to manage an energy crisis that is dragging down economies and threatening to cause outages or rationing. EU energy ministers are meeting on Thursday to work out measures to keep the price of natural gas in check, with some countries demanding more muscle limits in that market.

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On the oil cap debate, a senior government official within the price cap coalition expressed confidence that EU governments will soon agree on a price. The official said the price being debated – about $65 a barrel – fits well with criteria already agreed upon by a coalition of countries backing the plan, adding that the price could be adjusted over time if necessary.

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“We are looking at ways how this can work and how one can find common ground so that it can ideally be implemented in a practical and efficient way while preventing it from impacting the world. Countries can suffer extreme losses. European Union,” German Chancellor Olaf Scholz told reporters on Wednesday evening. “But for my part I want to say that I am confident that we will get it done soon.”

EU considering $65-$70 price cap for Russian oil

At $65, the price range would be well above Russia’s cost of production. Russia is already selling its crude oil at a discount and a higher limit is likely to have minimal impact on trade. Such a price is likely to be at or slightly above the spot price of Urals, Russia’s main export quality.

The European Union and the G-7 were originally expected to sign the price caps on Wednesday. The CAP requires the support of all EU Member States.

Oil prices fell Wednesday after Bloomberg reported a proposed price cap. One of the reasons traders have been put off by this is that insurers and shippers only need to ensure that the cargo they carry is sold below the limit price. If the limit comes close to current exemption levels, Russia can say it’s business as usual.

Range trading of oil prices is expected to hurt minimally

“Russian oil is currently trading at a significant discount to Brent at about $65 a barrel,” said Simone Tagliapietra, a senior fellow at the Bruegel think tank in Brussels. “If the G-7 price limit for Russian oil were set at the same level, it wouldn’t hurt Russia much.”

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The priorities behind setting the price cap were somewhat unclear: the US wanted to keep Russian oil flowing while also cutting off Moscow’s revenue. The EU sanctions initially seemed more aimed at reducing the revenue of Vladimir Putin’s war machine. The result of the tightly negotiated border is to reduce the impact of impending EU sanctions.

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Separately, the European Union is working on a new sanctions package that it hopes to present to member states soon, one of the people said. Poland and others are urging the bloc’s executive to speed up that deadline.

– With help from Michael Nienaber, Jan Bratanik, Maria Tadeo and Christopher Condon.

(Updated with details of fuel cap debate in fifth paragraph)

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