G7 price cap on Russian oil benefits China
This misguided cap isn’t only a subsidy to China and a price that still makes Rosneft enormously profitable and able to pay billions to the Russian state in taxes, chief economist at hedge fund Tressis Daniel Lacalle said.
The introduction of a price cap on Russian oil by the Group of Seven is erroneous and profitable to China because it can purchase energy products from Russia at a large discount, chief economist at hedge fund Tressis Daniel Lacalle wrote in an article for The Epoch Times.
“There are many mistakes in the G7 agreement to put a cap on Russian oil. The first one is that it doesn’t hurt Russia at all. The agreed cap, at $60 a barrel, is higher than the current Urals price, above the five-year average of the quoted price, and higher than Rosneft’s average netback price,” the analyst points out. The article notes that, according to Reuters, “the G7 price cap will allow non-EU countries to continue importing seaborne Russian crude oil, but it will prohibit shipping, insurance, and re-insurance companies from handling cargoes of Russian crude around the globe, unless it is sold for less than the price cap.”
“This means that China will be able to purchase more Russian oil at a large discount,” the expert says. “This misguided cap isn’t only a subsidy to China and a price that still makes Rosneft enormously profitable and able to pay billions to the Russian state in taxes. It’s also a big mistake if we want to see lower oil prices,” he explains. In his opinion, the G7 has created an unnecessary and artificial bottom to old prices.
On December 5, an embargo on maritime Russian oil shipments to the European Union was enforced. Moreover, EU states also agreed on a price cap for Russian oil delivered by sea, setting the ceiling at $60 a barrel last Friday. A similar decision was announced by the G7 and Australia.
The US, the EU and the UK are banning their companies from providing transport, financial and insurance services to tankers carrying oil from Russia at a price above the agreed-on ceiling.
As Russian President Vladimir Putin stated on Friday, the efforts to cap oil prices would not harm Russia. Kremlin Spokesman Dmitry Peskov in an interview with Izvestia said that Russia would not trade with those who support the oil price cap because there are other buyers.