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EU/G7 price cap comes into force today – Serbia offers commitments, whilst Hungary secures exemption

The price cap on Russian seaborne crude oil came into force today, following the EU’s announcement on Saturday that the International Price Cap Coalition had finalised the implementation of the latest sanctions on Russian fossil fuels. The cap is set at a maximum price of 60 US dollars (57 euros) per barrel for crude oil, and is adjustable in the future in order to respond to market developments.

“The G7 and all EU Member States have taken a decision that will hit Russia’s revenues even harder and reduce its ability to wage war in Ukraine. It will also help us to stabilise global energy prices, benefitting countries across the world who are currently confronted with high oil prices,” said Ursula von der Leyen, President of the European Commission.

The cap on refined petroleum products will take effect on 5 February 2023, with the price for refined products to be finalised in due course.

The crude oil cap enters into force simultaneously across all Price Cap Coalition jurisdictions, which comprises the EU, G7 and Australia. According to the EU, the cap provides for a ‘smooth transition’ as it will not apply to oil purchased above the price cap, which is loaded onto vessels prior to 5 December and unloaded before 19 January 2023.

However, the price cap will allow European operators to transport Russian oil to third countries, provided its price remains strictly below the cap.

Budapest remains sceptical, securing exemptions

Whilst the crude oil cap is being implemented by all members of the Price Cap Coalition, Hungary has been granted an exemption, said the country’s Foreign and Trade Minister, Péter Szijjártó.

“The European Union introduces an oil price cap. It would be high time for Brussels to realise that such and similar measures hurt the European economy the most” said the Hungarian Minister via Facebook. “It would be necessary to increase the number of energy carriers, because that would lower prices. During the negotiations on the oil price cap, we fought hard for Hungarian interests, and in the end, we were successful: Hungary has been exempted from the application of the oil price cap”.

On Friday, the Hungarian Prime Minister, Viktor Orban, said that sanctions might have slowed the Russian advance against Ukraine – however, due to skyrocketing energy prices, Russia’s revenue stream from energy carriers is at an all-time high, resulting in it being able to continue its war effort. Due to this, the PM believes that “sanctions have failed to achieve their objective” and “have not brought us a millimetre closer to the end of the war.”

‘Not in the business of crime’ – Serbia promises solidarity

Whilst Budapest seems to remain sceptical about the EU’s sanctions regime, Serbia – a third country in the region – has assured EU leadership that Belgrade aims to align its approach to Russia with Brussels.

The Serbian President, Aleksandar Vučić, said that ‘no one’ can circumvent the sanctions imposed by the EU on Russia, during a press conference on Friday with the EU Commissioner for Neighbourhood and Enlargement, Oliver Várhelyi. “We are not in the business of crime, we are not in the business of profiting from anyone’s suffering during the war, nor do we need extra profit. We have a strong economy and public finances to take care of ourselves, and with the support of the European Union, we have no other major problems,” President Vučić added.

During the meeting with Commissioner Várhelyi, the Serbian President also discussed Serbia’s further energy diversification ambitions, including the possibility of securing additional gas supplies from Azerbaijan, as well as accelerating progress on the Serbia-Bulgaria Interconnector and the Serbia-North Macedonia Interconnector.

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