(Bloomberg) – European Union countries are struggling to reach an agreement on a cap on the price of Russian oil and are likely to delay reaching an agreement on the issue until after agreeing on a broader sanctions package.
Cyprus and Hungary are among the countries that have expressed opposition to the oil cap proposal, according to people familiar with the ongoing talks. Sanctions in the EU require unanimity, giving each country an effective veto.
The European Commission, the bloc’s executive arm, met with member states at the weekend to try to find a compromise on the package of restrictive measures, according to the people. Countries may push for a preliminary agreement before the informal meeting of EU leaders in Prague on October 6.
The European Union is rushing to impose tougher sanctions after Russian President Vladimir Putin announced a “partial mobilization” of troops last week and began holding “referendums” condemned by the United Nations on annexation in regions still occupied by Ukraine. There were also recent reports that Ukrainian forces discovered a mass grave in the city of Izyum, which was controlled by Russia. Other measures being discussed include diamond import controls and bans on certain steel products.
Separately, the 27 member states were also closer to supporting a proposal to restrict the export of electronic components used in weapons to Russia, according to the people.
Member states assert that restricting access to electronic components used in weapons against Ukraine is one of the most effective tools to strike the Russian military, especially since Moscow needs more weapons for the up to 300,000 additional soldiers it seeks to muster.
The European Union’s push to cap the price of Russian oil would align with US efforts to keep the cost of crude oil from rising and eroding Moscow’s revenue from energy sales. The G7 reached a political agreement on a cap earlier this month and the commission said it would work to implement the proposal.
People said many details still needed to be ironed out, including a price to be set by allies. Any measures are due to come into effect before December 5th, when previously adopted EU measures banning the import of seaborne oil as well as services needed to ship it are in place.
In June, the 27-nation bloc spent weeks haggling over the terms of existing oil measures, which include a ban on seaborne Russian oil and petroleum products, an exemption for pipeline deliveries, and a ban on providing services, such as insurance, to Russian oil. shipments anywhere in the world. The United States has been pressing for the ban to be eased over fears that it could lead to higher global oil prices.
It remains unclear how effective the pricing system will be, especially since some of Russia’s largest buyers, including China and India, have not agreed to join. US officials argued that the price cap could work even if many buyers did not formally join the alliance, as they could still use the system to lobby in contract negotiations with Moscow to negotiate lower prices.
Adopting the cap would also require member states to set aside national interests in favor of European solidarity.
EU countries that have won exemptions for oil received through their own pipelines want to ensure those exemptions remain in place, while countries that import by sea could seek to tie the price cap to the currently envisioned full ban on seaborne shipments in order to level the playing field. , one of the people said. The person added that shipping countries, such as Greece, Cyprus and Malta, may also try to protect their industries from the measures.
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