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Sources say the Group of Seven is halting its regular reviews of the Russian oil cap as prices soar

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The Russian oil tanker Pure Point carrying crude oil is anchored at the port of Karachi, Pakistan, on June 13, 2023. Photo: Akhtar Soomro/Reuters. Obtain licensing rights

BRUSSELS (Reuters) – The Group of Seven and its allies have postponed regular reviews of Russia’s oil price cap plan, sources familiar with the matter told Reuters, even though most Russian crude is trading above the cap due to high global crude prices. .

Russian producers have found ways to sell oil using fewer Western vessels and insurance services, making it difficult for the West to enforce the current price cap because the companies facilitating trade are outside their purview.

The G7 countries, along with the European Union and Australia, imposed a cap on Russian oil prices last December, followed by a cap on fuel from February. Initially, the EU countries agreed to review the price cap every two months and adjust if necessary, while the G7 would review “as appropriate” including “implementation and compliance”.

However, the G7 has not revised the cap since March, and four people familiar with G7 policies said the group had no immediate plans to consider amending the scheme.

“There were some talks in June or July to do a review, or at least talk about it, but it never happened officially,” a diplomatic source said.

The sources said that although some EU countries were keen on a review, they said the US and G7 members were less willing to make changes.

The sidelines of the upcoming UN General Assembly later this month could serve as an informal platform for talks on the cap.

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The mechanism allows third countries to purchase Russian fuel using Western ship insurance if there is evidence that the purchase does not exceed the price limits of $60 per barrel for crude oil, $45 per barrel for heavy fuel, and $100 per barrel for light fuels such as gasoline and diesel.

The idea was spearheaded by Washington to cut Moscow’s revenues amid its war on Ukraine while avoiding market turmoil as a result of the European Union’s embargo on Russian oil.

Benchmark Brent crude futures are trading at their highest levels this year at more than $90 a barrel, raising the value of global crude, including Russia’s Urals.

Russia’s Finance Ministry said the average price of the main Urals crude recovered to an average of $74 per barrel in August – well above the maximum of $60 per barrel – and up from an average of $56 in the first six months of the year.

Russia was forced to cut its exports of oil and products immediately after the price cap was imposed, as it struggled to find enough ships to transport all of its production.

However, the country has managed to pass most of its exports into the hands of non-Western domestic or foreign shipping companies, which do not require Western insurance coverage.

Reuters calculated that at least 40 intermediaries, including firms with no previous history of involvement in the business, handled at least half of Russia’s total exports of crude oil and refined products between March and June.

An industry source said that while a “dark fleet” of vaguely owned tankers was now used to transport Russian crude, Western ships were still involved in moving products because it was harder to monitor.

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According to data from the London Stock Exchange, Russian crude has been trading above the limit since mid-July and is currently trading at around $67 a barrel on Russian crude oil terminals. Refined Russian products such as fuel oil and diesel also exceeded the maximum permissible limits.

A US Treasury official said this week that the cap is still effective because it has helped reduce Russian revenue. He said the group would remain nimble but added that there was no plan for an immediate review.

Reporting by Julia Payne; Editing by Thomas Janowski

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