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Russia Suggests A Price Cap On U.S. LNG

The U.S. should set a price cap on U.S. LNG going to Europe, as American gas is being delivered to Europe at prices four times higher than the price for domestic consumption, Russian Deputy Prime Minister Alexander Novak said in an interview with Russian state television.

“We would advise our US partners to set a certain cap price for the resources they are supplying to Europe. This only pushes Europe toward energy poverty,” said the Russian official who represents the country at the OPEC+ meetings.

Novak, commenting on the U.S.-proposed price cap on Russian oil, reaffirmed Russia’s stance that it would not deliver its oil to countries that will join the price cap, regardless of whether the cap is the recently aired $60 per barrel.

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“This is interference with market instruments,” Novak said.

“We are ready to work with consumers that are prepared to work under market principles.”

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Earlier this month, European Union ambassadors reached an agreement to impose a new package of sanctions on Russia, including banning maritime transportation for Russian oil to third-party countries unless the oil is sold below or at a certain price cap.

The U.S. Treasury is looking to structure a three-phased approach to the G7 sanctions and price caps on Russian oil to keep Russian crude and products flowing—but at lower prices. The G7 group of the most industrialized nations will first target Russia’s crude oil, then move on to include diesel in the second stage. Finally, the lower-value products, such as naphtha, will be part of the third phase.

Some EU countries are also pushing for a price cap on natural gas. Belgium’s Prime Minister Alexander De Croo, for example, has said that the EU could impose a hard cap on Russian gas and a flexible ceiling on LNG imports, which would still be high enough for LNG exporters to have the incentive to bring it to Europe.

The European Commission has been reluctant so far to propose a gas price cap precisely because of the concern that by limiting the price, LNG exporters will simply skip Europe and sell their cargoes to customers in Asia.

By Michael Kern for Oilprice.com

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  • Mamdouh Salameh on October 14 2022 said:
    Russian Deputy Prime Minister Alexander Novak is an expert in global energy markets. He and the Saudi Energy Minister Prince Abdulaziz bin Salman work closely together to formulate OPEC+ energy strategy and policies.

    Mr Noval knows very well that his suggestion of capping the price of US LNG exports is doomed to fail exactly like the United States’ and the EU’s efforts to cap the price of Russian crude oil exports.

    Therefore, his suggestion is merely intended to drive a wedge between the EU and the United States which is milking its ally, the EU, by charging it the highest market price for the volumes of LNG it exports to the EU.

    There are growing grumblings among some of the EU countries particularly Germany and Italy about the exorbitant prices the US is charging them for its LNG but they are too meek to protest to the US for fear of reducing its exports in the absence of Russian gas supplies.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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