January 29, 2023

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Moscow blames Kyiv for bombings at two military bases in Russia: live updates

Moscow blames Kyiv for bombings at two military bases in Russia: live updates
attributed to him…Michael Probst / Associated Press

Europe and the United States on Monday began implementing two of the toughest measures aimed at reducing Russia’s income from oil, the main source of cash used to fund the nearly ten-month-old war in Ukraine.

the first, price cap initiative Led by the United States, it aims to increase economic pressure on the Kremlin while Avoid a global oil shock. The cap was set at $60 per barrel, and was approved by the G7, Australia, and members of the European Union.

The second is a ban under which European countries will not be able to buy most Russian crude from Monday. It was a move by the European Union He agreed months ago However, this was implemented in stages, with exceptions to prepare Member States.

Prices fluctuated in the oil markets on Monday, with Brent crude, the international benchmark, rising by about 2.5 percent, to $87.75 a barrel, at midday in Europe. West Texas Intermediate futures sold at $82 a barrel.

No immediate impact on oil supplies in Europe was expected, in part because the embargo has been going on for months, and energy companies have already started buying more oil from the United States, Brazil, Guyana and the Middle East.

Although analysts and traders say the price cap could be a nightmare to manage, one expert on sanctions said the drawn-out negotiations resulted in a deal that could work.

“I suspect that the compromise that’s been reached gives the policy the best chance it can work,” said Edward Fishman, a senior fellow at Columbia University’s Center on Global Energy Policy.

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Mr. Fishman, who previously led planning and implementation of sanctions on Russia at the State Department, said there are several reasons for optimism. One is the recent weakness in the oil markets, which he interpreted as meaning that Russian oil is no longer as important to the markets as it was a few months ago. He also said the agreed price of $60 is a “Goldilocks” level, not so high as to give Russia more revenue than it is currently receiving or so low as to discourage Moscow from producing oil.

He also said the cap clause to review the price level every two months, or more frequently if necessary, provided the “flexibility” that has historically helped make sanctions, such as those targeting Iranian oil sales, effective.

However, skepticism about the potential effectiveness of the measures stems in part from the United States and European countries forcing shippers and European insurers to enforce them by refusing to handle shipments priced over $60 a barrel.

For starters, analysts say, data on Russian oil pricing has become scarce in recent months. Few if any deals are reported, and the prices offered in the market are “mostly based on hearsay,” said Victor Katona, an analyst at Kpler, a research firm that tracks freight.

Russia has said it will not accept a price cap and has threatened to cut off supplies to countries that comply with the arrangement. If Russia follows such steps and restricts oil due to the flow of natural gas to Europe, it could wreak havoc on the oil markets.

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Kremlin spokesman Dmitry S. Peskov said on Monday that these measures will undoubtedly have an impact on the stability of the global energy market, according to Russia’s state-run news agency Tass, referring to the ban and the price cap. .

Analysts say Russia is building a so-called aging tanker fleet to export its oil and avoid EU sanctions, but they doubt it can assemble a large enough fleet. If it can’t, Russia may need to start closing the wells.

The G7 countries – the United States, Canada, Britain, Germany, France, Italy and Japan – have basically stopped buying Russian oil, so any problems with a drop in Russian exports threaten to hurt the economies of countries like China and India, their major customers. which refused to condemn the Russian invasion of Ukraine.

The looming embargo and price ceiling were two of the main reasons why OPEC and its allies, including Russia, on Sunday left their oil production quotas unchanged. The group, known as OPEC Plus, appears to have decided there is no reason to change its policy amid many economic uncertainties, including a faltering economy in China and crippling inflation globally that is fueling fears of a recession.

Many analysts believe that Saudi Arabia, the de facto leader of the group of producers, is seeking a price of around $90 per barrel of Brent crude. It is likely that the Saudis, according to market watchers, will cut production, regardless of protests from Ukraine and its allies, if prices fall significantly below this level.