MOSCOW (Reuters) – Russian President Vladimir Putin on Monday announced Russia’s long-awaited response to Western price caps by banning crude oil and petroleum products for five months from February 1. signed the decree. cap.
The seven major powers, the European Union and Australia this month agreed a price cap of $60 a barrel for Russia’s seaborne crude effective December 5 over Moscow’s “special military operation” in Ukraine.
The cap is close to the current price of Russian oil, but well below the windfall price Russia was able to sell this year, helping to offset the impact of financial sanctions on Moscow.
Russia is the world’s second-largest oil exporter after Saudi Arabia, and any major disruption to Russian sales would have a significant impact on the world’s energy supply.
The presidential decree, which was posted on government portals and the Kremlin website, was presented as a direct response to “unfriendly and unlawful actions by the United States and foreign countries and their participating international organizations.”
“Delivery of Russian oil and petroleum products to foreign entities and individuals is prohibited, provided that the contracts for these supplies directly or indirectly envisage the use of maximum price fixing mechanisms. ,” the statute states, specifically the United States and other countries that impose price caps.
“Established bans apply to all stages of supply up to the final purchaser.”
The decree, which includes a clause allowing Putin to overturn the ban in special cases, states: “This … will come into force on 1 February 2023 and will apply until 1 July 2023.”
Exports of crude oil will be banned from February 1st, while the date of the ban on petroleum products will be decided by the Russian government and may be after February 1st.
[1/2] Russian President Vladimir Putin attends a meeting of leaders of the Commonwealth of Independent States (CIS) in Saint Petersburg, Russia, December 26, 2022. Sputnik/Konstantin Zavrazhin/Pool via REUTERS
wider deficit
The price cap, unseen even during the Cold War between the West and the Soviet Union, is intended to neutralize the Russian treasury and Moscow’s military efforts in Ukraine.
Some analysts say the cap will have little direct impact on Moscow’s current oil revenues.
However, Finance Minister Anton Siluanov said on Tuesday that Russia’s fiscal deficit could be larger than the planned 2% of GDP in 2023 and that oil price caps could weigh on export earnings. Stated. Ukraine.
Russia has promised an official response for weeks, and the final order pretty much established what officials had already professed.
The G7 price cap would allow non-EU countries to continue to import Russian offshore crude oil, but unless it is sold below the price cap, shipping lines, insurers and reinsurers would It is prohibited to handle cargoes of Russian crude oil. .
EU member states have individually implemented embargoes that prohibit the purchase of Russian oil for sea transport.
Russian Urals crude traded above $56 a barrel on Tuesday, below the price cap level.
Brent crude rose slightly on the news, gaining 1.4% to $85.1 by 1743 GMT.
Reported by Alexander Marrow and Vladimir Soldatkin. Written by Alexander Mallow. Edited by David Evans, Mark Heinrich and Frank Jack Daniel
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