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G7 Gives Limits on Oil Prices to Russia, Effective

G7 Gives Limits on Oil Prices to Russia, Effective

Andrianus.my.id - The proposed price limit of the Group of Seven (G7) countries of US$65-US$70 (around Rp.1 million) per barrel on Russian oil will have little impact on Moscow's revenues.

According to five industry sources familiar with this, Russia already has other buyers, namely several Asian countries such as China and India, so that the price limit for the G70 cannot make Moscow distraught.

Data from the country's finance ministry shows oil and gas exports are expected to account for 42% of Russia's revenue this year at 11.7 trillion rubles, up from 36% or 9.1 trillion rubles in 2021.

The goal of the price cap is to deprive Russian President Vladimir Putin of revenue to fund a military offensive on Ukraine, without causing major disruptions to global oil markets that would push energy prices higher.

The G7 countries, including the United States, as well as the rest of the European Union and Australia, plan to impose price caps on Russian oil exports by sea on December 5.

India has emerged as China's second biggest single buyer of Russian oil since the conflict began in February. Indian refiners have replaced refiners in countries that have imposed sanctions on imports of Russian crude, or are shunning Russian crude to avoid negative publicity.

"Some Indian refiners are paying the equivalent of a discount of about US$25 to US$35 per barrel for international benchmark Brent crude for Russian Ural crude," two of the sources said, citing Reuters. Ural is Russia's main export crude oil.

With Brent trading around $85 a barrel on Wednesday, that translates to $50-$60 a barrel for the Urals, which is below the mark.

US Treasury Department guidelines published on Tuesday said the limit would be placed on what is known as a Free on Board (FOB) price, which does not include insurance and shipping costs. This would be the price the crude would sell for if the buyers went and picked it up from Russia.

US Treasury Department guidelines also do not allow buyers in countries that have imposed sanctions on imports of Russian crude, such as in the United States (US) and the European Union, to buy Russian oil even below price caps.

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