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Int Working Group On Russia Sanctions Calls For Lower Price Cap


The International Working Group for Russia Sanctions has called for a greatly decreased price cap on Russian fuel products as the EU deliberates the G7 price cap ahead of a Feb 5 implementation date.

  • The group writes in a white paper that G7 governments should set a more aggressive price cap on Russian oil products than crude price cap level because:
  • 1: " will have a major impact, since oil products account for a third of Russia’s total oil exports."
  • 2: "Russia is in a weaker position with products than crude, since they are much harder to redirect, and have higher logistic costs."
  • 3: "...stopping production would disrupt refineries."
  • The group assesses that, "Russia is likely to keep supplying oil products even under a more aggressive price cap," as due to Russia's low production costs it remains rational to continue supplying oil to markets.
  • The white paper recommends, "The price cap on crude oil to be progressively lowered in steps over time (“a ratchet”), ultimately aligning the crude price cap – and the price caps on diesel and other oil products - with the lower naptha and fuel oil price caps."
Figure 1: Proposed Level of Price Caps (Working Group on Russia Sanctions)

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