The EU reached a deal for a $60-per-barrel price cap on Russian oil Friday. Here is what to know about the cap, the EU embargo and what they could mean for consumers and the global economy.
FRANKFURT, Germany — Western governments are aiming to cap the price of Russia's oil exports in an attempt to limit the fossil fuel earnings that support Moscow's budget, its military and the invasion of Ukraine.
WHAT IS THE PRICE CAP AND HOW WOULD IT WORK?U.S. Treasury Secretary Janet Yellen has proposed the cap with other Group of 7 allies as a way to limit Russia's earnings while keeping Russian oil flowing to the global economy. The aim: hurt Moscow's finances while avoiding a sharp oil price spike if Russia's oil is suddenly taken off the global market.
WHAT EFFECT WOULD DIFFERENT CAP LEVELS HAVE?A $60 cap would not have much impact on Russia's finances, said Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels. That"will almost go unnoticed," he said, because it would be near where Russian oil is already selling. Healthy Aging EU reaches deal for $60-per-barrel price cap on Russian oil If the cap had been as low as $50, it would cut into Russia's earnings and make it impossible for Russia to balance its state budget, with Moscow believed to require around $60 to $70 per barrel to do that, its so-called"fiscal break-even."
With Monday's deadline looming, she said that"$60 is better than not agreeing at all. They can obviously revise it later on to reflect conditions on the market ... and tighten it." Even under those circumstances, the cap would make it"more costly, time-consuming and cumbersome" for Russia to sell oil around the restrictions, Shagina said.
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