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Week Ahead (5 December)

Monday, 5 December – EU ban on imports of seaborne Russian crude oil comes into effect; to be complemented by recently agreed price cap

Today, the EU’s ban on imports of seaborne Russian crude oil will come into effect, following an agreement reached in June, in line with other G7 members and Australia.

Russian crude oil delivered by ship constitutes nearly 2/3 of the oil that the EU imports from Moscow. Hungary, Slovakia, and the Czech Republic will be exempted and allowed to import Russian oil via the Druzhba pipeline. Bulgaria will be the only member state allowed to resume importing Russian crude oil by ship until the end of 2024. In February 2023 another EU ban on imports of Russian oil products, including gasoline, diesel, and jet fuels, will come into force.

The ban aims to slash Russia’s oil revenue, given its global status as the third-largest producer of oil and the second-biggest crude exporter.

To complement the ban on imports of seaborne Russian crude oil, the EU reached a tentative agreement with its G7 partners last Friday to set a price cap of 60$ per barrel on Russian oil sold to non-EU countries. In other words, EU’s insurance and shipping companies will only be allowed to participate in oil trading as long as tankers are carrying Russian crude to non-EU countries which do not pay more per barrel than the agreed limit.

The imposition of a price cap on oil exports, not only intends to further limit the Kremlin’s ability to finance its military campaign in Ukraine but also aims to prevent possible disruptions in oil supplies caused by higher prices.

Monday, 5 December – EU-U.S Trade and Technology Council to meet

Today, the third EU-U.S Trade and Technology Council (TTC) will be held. The summit will take place at a particularly sensitive period, following the €360 billion U.S Inflation Reduction Act that was passed earlier this year and will take effect in January. The EU is concerned that the subsidies will increase investment in the US at the EU’s expense. Furthermore, EU capitals are becoming increasingly frustrated over the high cost of LNG imported from the U.S, indicating a growing sentiment among top European officials that Washington is profiting from the war at the expense of the EU’s own economic growth.

Although a trade war seems unlikely, in the absence of a policy turn by the U.S in the upcoming TTC, the EU could opt for retaliatory measures, including by expanding its own subsidy scheme for European industry.

Monday, 5 December – Eurogroup to assess euro area member states’ draft budgetary plans for 2023 and discuss Commission’s proposal for new EU fiscal rules

The Eurogroup will meet today to assess the draft budgetary plans of Eurozone member states for 2023 and to discuss the Commission’s proposal for a reform of the EU economic governance framework.

It remains to be seen whether a consensus can be reached among EU capitals on a reformed EU economic governance framework, given opposing views on whether the fiscal reform should prioritise the reduction of sovereign debt or growth. Other points on the agenda are the post programme surveillance reports on Cyprus, Greece, Ireland, Portugal, and Spain, and the Eurogroup’s work programme for the first half of 2023.

Furthermore, Irish finance minister Paschal Donohoe is also due to be elected as the Eurogroup’s president, in the absence of other candidates. His re-election will grant Ireland two seats at the Eurogroup table.

Friday, 9 December – The Bank of England/Ipsos inflation attitudes survey to be published

On Friday, the findings of the quarterly survey on inflation attitudes will be published by the Bank of England and the polling company Ipsos.

In the previous survey from August, respondents gave a median answer of 7.6%, up from 6.1% in May, when asked to give the current rate of inflation. UK public satisfaction with the BoE’s handling of inflation reached an all-time low in August after the Bank’s survey found that 1/3 of people in the UK expressed dissatisfaction with its stance. Since the last survey, the BoE has increased interest rates to 3%, after a 75-basis point hike in November – the biggest hike in 33 years.

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