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EU Embargo on Russian Oil ratified by G 7 and Australia, to come into effect from 5th December

Vladimir Putin

G 7: After the European Union persuaded Poland to agree to a political agreement to price cap on the Russian Oil, the Group of 7 (G7) nations which is an intergovernmental political forum consisting of  Canada, France, Germany, Italy, Japan, the United States, the United Kingdom, and Australia—agreed to impose a $60 per barrel price restriction on Russian seaborne crude oil. This move will make it difficult for Russia to mobilize resources to pay for its ability to wage war in Ukraine.

The price cap would take effect from December 5 onwards.

Poland, which disputed the suggested level and looked into an adjustment mechanism to keep the cap below market prices, has been involved in a protracted discussion with the EU. It suggested that the price limit should be at the pit bottom, which would drain Russia’s revenues and limit its ability to prolong its conflict in Ukraine, Warsaw urged during the lengthy negotiations between it and the EU.

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The EU embargo will severely restrict Moscow from financing Ukraine conflict

Poland has approved the EU agreement, which includes a price mechanism to maintain the price of oil below at least 5% of the market rate, according to Polish Ambassador to the EU Andrez Sados, who spoke to media on Friday. The US authorities have expressed their satisfaction with this breakthrough agreement, calling it unprecedented and showing their commitment to bringing peace and resolution to the conflict between Russia and Ukraine.

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European Union President Ursula Von Der Leyen stated that the imposition of a price cap will stabilise global energy costs and benefit growing economies all over the world. She added that the price restriction would be modified over time in response to changes in the market.

Furthermore, the price cap will allow non-EU countries to continue importing sea borne Russian crude oil, and it will restrict the shipping, insurance and re-insurance companies handling cargoes of Russian Oil around the globe unless it is sold for less than the price cap.

It is expected that price cap will cripple the Russian economy , which is already contracting and the price cap will immediately have an adverse impact on Moscow’s primary source of revenue. It may be noted that almost all important shipping and insurance firms are based in G7 countries, and the price cap is expected to make it very difficult for Moscow to sell its oil at a higher price. It is expected that through this move global energy supplies would preserved will  have an impact on Moscow’s ability to raise resources to fight the war in Ukraine.

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