Iran Press/ Europe: On December 5th the European Union will at last implement a plan originally cooked up in May. It will ban seaborne imports of Russian oil. It will also prohibit European firms from insuring, shipping, or trading Russian crude anywhere in the world—unless the oil is sold at a price below a cap set by the West.
The EU agreed with the price after the holdout Poland gave its support, paving the way for formal approval over the weekend.
Ever since the Russian war against Ukraine began in February this year, the West has grappled with a conundrum. How should it cut Russia’s fossil-fuel earnings without also reducing the global supply of oil and fuelling inflation that hurts consumers around the world? When Europe first dreamed up its ban, it threatened to deal a serious blow to Russia’s oil cashflows. European insurers and shipping firms have long had a vice-like hold on energy markets. Fully 95% of property and indemnity insurance for all oil tankers has been handled by firms from Britain and the EU. This appeared to be a lever with which the West could control the sale of Russian oil globally.
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Yet even as the ban was announced a flaw was apparent. If Russian oil fails to make it to market, then global oil prices may spike, hurting Western consumers. Hence America’s Treasury department has since devised a cunning plan to water it down: to let European firms continue to offer their services, provided the oil involved is bought at a suppressed price set by the West.
On paper, this looks astute. But Russia has already said it will refuse to use tankers that join the oil-cap scheme. It could cut its oil exports, relying on a smaller group of non-Western tankers and insurers, and sending global prices spiraling.
Yet oil market analysts believe that the West’s proposed price cap on Russian oil is no magic weapon.
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