Ukraine’s Allies Agree on Russian Oil Price Cap

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Earlier this year, economic forecasters expressed concerns that Russia taking oil off the market could send gasoline prices in the United States above $7 a gallon by the end of the year.

“Our motives are to hold down Russia’s revenues to impede its ability to fight the war,” Treasury Secretary Janet L. Yellen said in an interview last month. “And second, to make sure that there’s enough global supply of oil that global oil prices don’t jump, because that would both exacerbate inflation and would likely cause a recession.”

American officials have been celebrating the imposition of the cap. “A lot of people doubted the resolve of the G7 and Europe in particular,” Ben Harris, the assistant secretary for economic policy at the Treasury Department, said in an interview. But, he said, the cap would help stabilize markets: “Sometimes you don’t get credit for the crisis avoided.”

The protracted talks in Brussels were evidence of the discord the cap has sown in Europe. For most of the process, E.U. officials and diplomats from some member countries worked to ameliorate two types of concerns.

One group of three E.U. maritime nations — Greece, Cyprus and Malta — demanded the price cap be placed very high, at or above $70 a barrel, to ensure that their business interests would not be disrupted. Another group of three hard-line pro-Ukraine countries — Estonia, Lithuania and Poland — demanded an ultralow cap, at or around $30 a barrel, to drastically slash the Kremlin’s oil revenue, no matter the disruption that would cause on the global oil markets.

The benchmark for the price of Russian oil, known as the Urals blend, traded from $60 to $70 a barrel in the year before the pandemic, close to global benchmark prices. A discount worth more than 20 percent to global prices opened up shortly after Russia’s invasion of Ukraine in February, but Russia was still able to sell Urals crude for around $100 a barrel at the post-invasion peak.

Since then, global oil prices have fallen while Russia signed agreements to sell its oil at a further discount to China, India and others. Those falling prices have strained Moscow’s finances, at least to some degree.

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