(Bloomberg) — European Union member states are racing to reach a political deal within weeks to impose a price cap on Russian oil.
The push has been boosted since President Vladimir Putin announced a “partial mobilization” of troops in response to Russia’s escalation in the war in Ukraine, and is likely to be an upcoming package Part of the new sanctions will be decided by the European Commission, according to people familiar with the matter. The cap would align the EU with U.S. efforts to prevent crude costs from soaring and hit Moscow’s revenue.
But despite renewed efforts by the European Commission, the EU executive and some members, the people who asked not to be named because the discussions are private, said the plan faces many hurdles , did not give positive results. Sanctions decisions require unanimous consent, which is especially complicated in this case because each EU member state has different energy needs.
Member State representatives will meet with the committee over the weekend to discuss new sanctions, which, in addition to the oil cap, may include additional restrictions on individuals and industries such as technology and luxury goods, people Say.
Many details remain to be worked out, including the price of the cap, said people familiar with the matter. It is unclear how the cap will be implemented alongside the EU embargo on Russian oil and the ban on services required for transport agreed earlier this year. Either way, there is a degree of urgency, as price caps need to be adopted before EU measures come into force on December 5. The Group of Seven nations reached a political agreement on the cap earlier this month, saying the committee would work to garner support for the measure from all EU nations.
Representatives of governments in Brussels will strive to reach a tentative agreement on a price cap ahead of an informal meeting of EU leaders in Prague on Oct. 6, people familiar with the matter said. But one of the biggest question marks will be Hungary, which often acts as a spoiler when the EU needs a unanimous decision.
Hungarian Prime Minister Viktor Orban has launched a campaign at home to criticize any EU-wide energy sanctions. Hungary delayed passing an EU sanctions package on crude in June, only signing it after securing a waiver that still allowed Budapest to get pipeline oil.
In June, EU countries spent weeks haggling over the terms of current oil measures, which Including the embargo of Russian seaborne oil and oil products, the exemption of pipeline transportation, the prohibition of insurance for Russian oil transportation anywhere in the world and other services. The U.S. has been pushing to ease those bans over fears they could send global oil prices soaring.
The effectiveness of the price cap system is unclear, especially since some of Russia’s biggest buyers, including China and India, have not agreed to join. U.S. officials have argued that price caps could work even if many buyers did not formally join the alliance, as they could still use the system to negotiate lower prices in contract negotiations with Moscow.
Adoption of the cap also requires member states to put their national interests aside in support of European solidarity.
EU countries with oil exemptions by pipeline will want to ensure that oil remains intact, while countries importing by sea can seek to link price caps to the total embargo currently envisaged by sea, one of the informed sources said. The delivery is to level the playing field, the people said. Shipping countries such as Greece, Cyprus and Malta could also try to protect their respective industries from the measures, the person added.
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