[ANALYSIS] Today’s EU Agenda: Russian oil price cap and “dynamic” gas price cap to be proposed

Analysis details (07:12)

AGENDA

• 
  09:00BST/04:00EDT - Meeting of the College of Commissioners to discuss a dynamic gas price cap


• 
  13:30BST/08:30EDT - EU Ambassadors to be briefed on a new Russian sanctions package

DYNAMIC CAP ON GAS IMPORTS: the meeting of the College of Commissioners will discuss this morning the proposal of a “dynamic” cap on all gas imports.

• The EU is split on price caps on important gas (beyond Russia), which was proposed in a bid to stem company and household inflation.


• The issue is seemingly maintaining enough of an incentive for LNG shipments to continue to Europe, with a “dynamic” price cap proposed in order to maintain that incentive, e.g., with a slight premium to Asia. Secondly, there is an issue of competition and distribution within the EU itself.


• 
  All-in-all, an agreement on this matter is unlikely to be reached, according to reports via Politico citing senior diplomats, with heavyweights Germany, Netherlands and Denmark opposed to the idea.


• If the proposal is greenlighted by commissioners, the Commission will then propose the cap at the EU energy ministers’ meeting on Friday.

RUSSIAN OIL CAP AND FURTHER SANCTIONS: The new sanctions package would be unveiled to EU Ambassadors, whereby a Russian price cap will also be proposed. 

Russian oil cap:

• The mechanics of a Russian oil cap will see shipping and insurance firms banned from dealing with Russian oil if the price is higher than what is currently being sold in Asia (~30% discount vs Europe).


• Other G7 allies will impose similar sanctions – “The idea is that even if they don’t officially subscribe to the cap, countries such as China and India would have no incentive to pay more for the Russian oil.”, Politico explains.


• The EU will also compensate (under a tentative agreement) countries such as Cyrus and Greece whose shipping sector will be hit by the cap.


• Brussels and Washington hope to have the price-capping mechanism for Russian oil exports in place by December 5th

Other sanctions:

• According to Politico, under the deal, “the EU will soften its sanctions on other products, effectively removing the shipping ban on Russian fertilizers, cement and other products.

28 Sep 2022 - 07:14- EquitiesGeopolitical- Source: Newsquawk