EU Asks Members to Set Russia Oil-Price Cap at $60

· No Profit for Russia but Oil will Flow

Cap is an attempt to squeeze the Kremlin’s oil revenues while keeping global supplies steady

The European Commission, the European Union’s executive body, has asked the bloc’s 27 member states to approve a price cap on Russian oil of $60 a barrel, according to people familiar with the matter.

Senior officials from the bloc’s member states began discussing the proposal on Thursday afternoon.

All 27 member states need to approve the level of the price cap, and negotiations could continue or a different level could be agreed to later Thursday. But members have largely coalesced around a cap of $60 a barrel to such a degree that the commission believes it can get a deal at this level, the people said.

The price cap is part of the West’s attempt to squeeze the Kremlin’s oil revenues while keeping global oil supplies steady and avoiding an increase in energy prices. With it, the Group of Seven and Australia aim to ban the provision of maritime services for Russian oil shipments unless the crude is sold at or under the price.

The G-7 still needs to approve the price for it to go into effect, and the group might not immediately agree with the EU decision. Under the system, companies shipping Russian oil will still be able to access EU insurance and brokerage services if they sell the oil at or under the price-cap level.

The cap is designed to take effect on Dec. 5, when a separate EU embargo on Russian vessel-bound crude oil imports enters into force. U.S. officials had worried that the embargo, combined with the threat of cutting off EU insurance and other services for vessels shipping Russian oil, could send oil prices upward, generating fresh revenue for the Kremlin’s war machine. The price cap was crafted as a way to try to allow Russian oil to sate global markets without Moscow getting the full benefit of its sales.

The cap would set Russian crude prices significantly below the international benchmark, called Brent, which traded at just under $88 a barrel Thursday. Russian crude trades at a significant discount to that, but since many buyers have shunned it altogether, price transparency has been more difficult.

In some cases, Russian crude has already been trading well under $60 a barrel. Russia’s Urals crude fetched $48 a barrel when exported from the Baltic port of Primorsk on Wednesday, according to Argus Media, which assesses prices in commodity markets.

EU ambassadors have spent hours negotiating over final approval of the price-cap level over the past several days. But several EU officials have voiced doubts about the effectiveness of a mechanism whose price cap is currently above the price of some Russian oil exports.