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Monday, December 5, 2022

Everything you need to know about the G7 price cap on Russian oi

G7 price cap on Russian oil: All you need to know


 BRUSSELS:On December 5, the 27 countries that make up the European Union, Australia, and the Group of Seven imposed a price cap on Russian ship-transported crude oil with the intention of making it harder for Moscow to finance its war in Ukraine and keeping the global oil market stable.


In addition to the price cap, the EU has imposed an embargo on purchasing seaborne Russian crude oil. This measure primarily aims to provide third countries with the option to continue purchasing it if the transaction falls below the price cap.


The main components of how the price cap is supposed to work are as follows:


Level of price cap The price cap was $60 per barrel.

The price cap will be adjusted every two months, beginning in the middle of January, to ensure that it remains at least 5% below the International Energy Agency's average price for Russian crude.The European Union's 27 members, followed by the G7, will unanimously approve of each cap change.


There will be a 90-day grace period following each cap change to ensure that no ships are caught at sea carrying cargo at a price that has expired.


What is prohibited: Unless the oil is purchased at or below the price cap, G7 and European Union insurance and reinsurance companies, as well as institutions financing Russian crude transactions, will not be permitted to handle such cargoes.


Unless the oil is sold at or below the $60 price cap, shipping companies cannot provide tankers for the transportation of Russian crude.


What is allowed? 

If Russian crude oil is purchased at or below the price cap and in an emergency, providing financial and shipping services is allowed.The price cap may not apply to certain projects that are necessary for certain third-party nations' energy security.


Entry into Force The price cap goes into effect on December 5, but ships that were loaded before that date can carry their cargo and unload by January 19 without being penalized during a 45-day transition period.


Penalties

 EU operators will not be able to insure, finance, or service a third-party-flagged vessel that intentionally carries Russian oil above the price cap for 90 days after the cargo has been unloaded.


National laws will apply to EU-flagged vessels, but the EU is already working on a penalty of 5% of global turnover for businesses that break EU sanctions.

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