Right here is the letterthey argue for a cap on Russian oil and fuel costs:
As anticipated by the G7, the worth cap would set a most worth at which Russian oil could possibly be traded alongside G7 companies. This worth, fastened in {dollars}, could be considerably decrease than the world worth, however larger than the marginal price of manufacturing in Russia. To make use of US, UK, EU and associated monetary companies (reminiscent of insurance coverage, credit score and funds), market contributors might want to certify that each one qualifying purchases are at or beneath this threshold.
Given the significance of the collaborating international locations for world finance and for maritime transport, compliance with this cover will create strain for a drop within the worth of Russian oil transported by tanker. Though we don’t count on all transactions to be performed underneath the worth cap, its existence ought to considerably enhance the bargaining energy of personal and public sector entities shopping for Russian oil.
The value cap maintains financial incentives for Russia to supply present volumes. In April 2020, when the benchmark Brent worth was near $20, Russia continued to provide oil to world markets, as this worth was larger than the price of manufacturing in lots of or most present Russian oil fields. Russia has little or no onshore storage obtainable, and since shutting down and restarting oil fields is dear and dangerous, it was extra worthwhile for Russia to proceed producing within the presence of low costs. The value of Brent is now round $96 a barrel, however Russia receives a lot much less as a result of “Urals discount”. This low cost is brought on by the perceived stigma of shopping for Russian merchandise for some clients; they refuse to bid for Russian oil, which reduces efficient demand and lowers the worth that remaining clients should pay.
The oil worth cap proposal would successfully institutionalize the discount of the Urals and subsequently additional scale back the greenback worth of the Russian authorities’s predominant income stream.
Learn all the things fastidiously, the checklist of signatories is beneath.