Russia’s financial crisis must come sooner

A DIPLOMATIC stand-off between European countries over the price cap to set for Russia’s oil exports threatens to hobble efforts to limit the Kremlin’s resources to wage its war of aggression against Ukraine. It’s time to break the impasse.

On one side are Poland, Estonia, and Lithuania, pushing for a price of no more than US$30 per barrel. On the other side are Greece, Crete, and Malta, which would prefer a price in the range of US$60-70. The European Commission reportedly has proposed US$62 as a compromise. The United States is urging the Europeans to agree among themselves ahead of the Dec 5 deadline, when the cap is supposed to go into effect.

Most of the argument is about the price cap’s possible effect on global oil prices. When the cap was first announced by the G7 in the summer, JPMorgan predicted that oil prices would soar – perhaps as high as US$380 per barrel. In fact, Brent benchmark oil prices have declined steadily since that time, falling from about US$100 per barrel to close to US$80. (Russia currently receives around US$60 per barrel, a discount that reflects the stigma of supporting the Kremlin war machine through oil purchases.)