EU Agrees to Cap Russian Oil at $60 per Barrel

European Union flags fly outside the European Commission headquarters in Brussels (Reuters)
European Union flags fly outside the European Commission headquarters in Brussels (Reuters)
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EU Agrees to Cap Russian Oil at $60 per Barrel

European Union flags fly outside the European Commission headquarters in Brussels (Reuters)
European Union flags fly outside the European Commission headquarters in Brussels (Reuters)

European countries agreed to cap Russian oil price at $60 per barrel to further weaken Moscow's ability to finance its war in Ukraine.

With this agreement, the bloc countries joined their allies in the Group of Seven (G7), especially the US, UK, and Australia, after Poland obstructed the measure before it withdrew its objection on Friday evening.

The cap is set to be implemented starting Monday when the European Union's embargo on Russian seaborne crude goes into force.

Energy expert Phuc-Vinh Nguyen of Jacques Delors Institute said Russia had earned $71 billion selling oil to EU clients since its February invasion of Ukraine.

Russia's annual defense budget is estimated at $63 billion.

"We can formally agree to the decision," Poland's EU ambassador, Andrzej Sados, told reporters after his country pressed to set a lower price, according to Agence France-Presse (AFP).

The EU presidency, currently held by the Czech Republic, confirmed member state ambassadors had agreed on the price cap and that the decision would enter into force when published in the EU official journal this weekend.

On Friday, the White House also "welcomed" the agreement, and National Security Council spokesman John Kirby told reporters Friday that "the cap itself will have the desired effect on limiting Putin's ability to profit off of oil sales and limit his ability to continue to use that money to fund his war machine."

The EU sanctioned Russian oil traveling by sea beyond the $60 limit to curb the revenue Moscow earns from deliveries to countries such as China or India.

The measure will enhance the effectiveness of the European ban, which comes months after the US and Canada ban.

Russia is the second largest exporter of crude oil in the world. Without setting a ceiling, it will be straightforward for them to reach new buyers at market prices.



Dollar Hovers as Investors Focus on Israel-Iran Conflict ahead of Fed Decision

US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
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Dollar Hovers as Investors Focus on Israel-Iran Conflict ahead of Fed Decision

US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
US dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo

The US dollar dipped against the yen and steadied against the Swiss franc on Wednesday, as fighting between Israel and Iran prompted investors to scoop up safe havens, while a Federal Reserve decision later on rates kept volatility subdued.

Israel has bombarded arch-enemy Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic.

The US military is also bolstering its presence in the region, Reuters reported, stirring speculation about US intervention that investors fear could widen the conflict in an area with critical energy resources, supply chains and infrastructure.

Iranian Supreme Leader Ali Khamenei said in a statement read by a state television presenter on Wednesday that his country would not accept US President Donald Trump's call for an unconditional surrender.

The dollar has resumed its role as a safe haven, having gained around 1% against both the Japanese yen and Swiss franc since last Thursday. On Wednesday, theurrency took a breather, edging fractionally lower against the yen and the franc and more noticeably so against the euro and the pound.

"The dollar is still a safe haven because of its depth and liquidity, so, yes, the structural forces are diluting the dollar safe-haven activities, but they're not eroding them completely," said currency strategist Rodrigo Catril at National Australia Bank.

"But in a scenario of big risk aversion, the dollar will still gain support, but maybe not to the same extent it has managed in the past."

Against a basket of six other major currencies, the dollar is still down around 8% so far this year, as confidence in the US economy and the reliability of Trump's administration as a trading and diplomatic partner has faded.

With the Fed's decision on interest rates just hours away and US markets closed on Thursday for the Juneteenth federal holiday, activity in currencies was muted.

Against the yen, the dollar fell 0.3% to 144.845 and was steady against the franc at 0.8175 francs.