Reuters: G7 and Australia agreed to set a fixed price for Russian oil

Anhelina Sheremet

The G7 and Australia agreed to establish a fixed ceiling price for Russian oil instead of a floating interest rate.

This was reported by Reuters with reference to its own sources.

“The coalition agreed that the price cap would be a fixed price that would be reviewed regularly, not a discount to the indexed price. This will increase market stability and simplify compliance to minimize the burden on market participants,” said a coalition source, who was not authorized to speak publicly.

A starting price has not been set, but will be announced in the coming weeks, according to multiple sources. The coalition partners agreed to regularly review the fixed price. According to the source, the disadvantage of the agreed fixed price system is that it requires more meetings of the coalition and the bureaucracy to review it regularly.

U.S. Treasury Secretary Janet Yellen and other G7 officials say the price cap, which is due to begin on Dec. 5 for oil and Feb. 5 for petroleum products, will reduce funding for Russia but will not cut the supply of oil and petroleum products to consumers. Russia, on the other hand, declared that it would refuse to supply oil to countries that cap maximum prices.

A stable price ceiling could allow insurers to more confidently extend contracts and enter into new ones, without fear that countries that buy oil may adjust the price.