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How does the price cap on Russian oil work? As I understand, EU insurers are now prohibited from doing business with freight companies that transport Russian oil by sea – unless they comply with the cap. I have three questions:

  1. Can Russian companies simply enjoy insurance services from other providers?

  2. Can Hungary, Bulgaria and other countries, which are exempt from the law, resell non-capped Russian oil and let the Russian government rake in just as much?

  3. It may seem implausible now, but what if the market price drops below the cap level of $60/bbl? Will Russian oil be sold at a premium?

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  • This might be better posted on Politics.SE.
    – Allure
    Dec 7, 2022 at 10:35
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    To #3, no, the $60 is a maximum. That's what "cap" means. The idea is to prevent people from paying more than $60 per barrel for Russian oil. It is perfectly fine for them to pay less, and if the market price is under $60, they obviously would. (Of course, a drop in the market price may well motivate the countries involved to lower their price cap also.) Dec 7, 2022 at 17:09
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    To #3: The goal is that the price cap should be at least 5% lower than the market rate. Therefore should that rate become lower than $60, the cap can be adjusted. Dec 7, 2022 at 20:42

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As I understand it, the ban covers EU insurers, EU reinsurers, EU insurance brokers, EU shipping companies, and EU shipowners leasing to companies abroad. The idea is that these cover enough of the respective market to significantly impact Russian trade.

When it comes EU members abusing exceptions, note that the relationship between Hungary and much of the EU is currently quite adversarial. But Hungary would like to remain a net recipient of EU funds, and that limits the things Hungary and others can do. As Canada said in a similar situation, "the idea of sanctions is to influence Russia, not to hurt allies."

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