Missiles target Ukraine’s energy grid; explosions at 2 Russian bases reported: Live updates

Credit…Michael Probst/AP

Europe and the United States kicked off two of the toughest measures on Monday aimed at curbing Russia’s oil revenues, the main source of cash used to fund its nearly 10-month war in Ukraine.

The first is a U.S.-led price-cap initiative aimed at increasing economic pressure on the Kremlin while avoiding a global oil shock. The limit was set at $60 a barrel and was endorsed by the Group of Seven, Australia and EU member states.

The second is an embargo, whereby European countries will no longer be able to buy most Russian crude from Monday. It’s a step the EU agreed to a few months ago, but with exceptions, it’s being phased in to help member states prepare.

Prices in the oil market were volatile on Monday, with international benchmark Brent crude up about 2.5 percent at $87.75 a barrel by midday in Europe. West Texas Intermediate crude futures were at $82 a barrel.

No immediate impact on oil supplies in Europe is expected, partly because the embargo has been in place for months and energy companies have started buying more oil from the U.S., Brazil, Guyana and the Middle East.

While analysts and traders said imposing price caps could be a nightmare, one sanctions expert said lengthy negotiations had resulted in a deal that has the potential to work.

“I suspect the compromise that was reached gave the policy the best chance of success,” said Edward Fishman, a senior research scholar at Columbia University’s Center for Global Energy Policy.

gentlemen. Fishman, who led the planning and implementation of sanctions against Russia at the State Department, said there were several reasons for optimism. One is the recent weakness in the oil market, which he believes means Russian oil is no longer as crucial to the market as it was a few months ago. He also said the agreed price of $60 was a “counterproductive” level, neither high enough to bring Russia more revenue than it currently receives, nor low enough to prevent Moscow from producing oil.

He also said the cap rule, which reviews price levels every two months, or more frequently if needed, provides the “flexibility” that has historically helped keep sanctions, such as those targeting Iranian oil sales, in effect.

Still, skepticism about the possible effect of these measures stems in part from the US and European countries requiring European shippers and insurers to enforce them by refusing to handle cargo priced above $60 a barrel.

First, data on Russian oil pricing has become scarce in recent months, analysts said. Viktor Katona, an analyst at research firm Kpler, which tracks shipping, said hardly any deals had been reported and market quotes were “mainly based on rumours”.

Russia has said it will not accept the price cap and has threatened to cut off supplies to countries that abide by the arrangement. If Russia takes these steps and restricts oil because it has gas flowing to Europe, it could wreak havoc on the oil market.

“These measures will undoubtedly have an impact on the stability of global energy markets,” Kremlin spokesman Dmitri S. Peskov said on Monday, referring to the embargo, Russian state news agency TASS reported. and price caps.

Analysts say Russia has been building a so-called shadow fleet of old tankers to export oil and avoid EU sanctions, but they doubt it will be able to build a fleet large enough. Failing that, Russia may need to start shutting in wells.

The G7 countries – US, Canada, UK, Germany, France, Italy and Japan – have essentially stopped buying Russian oil, so any problems with falling Russian exports could hurt the economies of big client countries like China and India who refuse to blame Russia Invade Ukraine.

The looming embargo and price caps were the main reasons why the Organization of the Petroleum Exporting Countries and its allies including Russia decided on Sunday to keep oil production quotas unchanged. The group, known as OPEC+, appears to have decided there is no reason to change its policy amid a host of economic uncertainties, including a sluggish Chinese economy and global inflation heavily fueling recession fears.

Saudi Arabia, seen by many analysts as the de facto leader of the oil-producing bloc, is seeking to price Brent at around $90 a barrel. According to market watchers, if prices fell sharply from that level, Saudi Arabia could cut production despite protests from Ukraine and its allies.

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