Russia announced, on Tuesday, that it will ban the export of its oil to countries that imposed a ceiling on the price of Russian crude, starting next February.
The decision came as part of a decree signed by Russian President Vladimir Putin on Tuesday banning the supply of oil and petroleum products to countries that imposed a ceiling on Russian crude prices.
According to the decree, “the decision will enter into force on February 1, 2023, and will last for five months, until July 1.”
The decree, which was posted on a government online portal and the Kremlin’s website, was presented as a direct response to “hostile and contrary to international law actions by the United States, foreign countries and international organizations affiliated with them.”
The decree stipulated that “the delivery of Russian oil and petroleum products to foreign entities and individuals is prohibited unless the contracts for these supplies stipulate the use of the mechanism for determining the maximum prices, directly or indirectly.”
The decree specifically referred to the United States and other foreign countries imposing price caps.
Putin said last week that he intended to sign a decree related to Russia’s response to a price ceiling imposed by the Group of Seven major industrialized nations, the European Union and Australia on December 5, of $60 a barrel.
Russian Finance Minister Anton Silyanov said that the budget deficit in his country may exceed the expected two percent of GDP in 2023, as the price ceiling imposed on crude pressures Russian export revenues, which puts a new financial obstacle in front of Moscow, which is spending generously on its military campaign in Ukraine.
The step of setting a ceiling for low oil prices aims to prevent the world from suddenly losing Russian oil, which might lead to a new rise in energy prices.
The New York Times reported that the law does not aim to prevent the sale of Russian oil, but rather seeks to allow Russia to continue selling oil, but with less financial return.
According to the newspaper, “Doing so would greatly affect global supply and push prices higher at a time when global inflation is already rising. It would also affect countries such as India and Turkey – the main buyers of Russian crude – whose support the West hopes to benefit from to maintain pressure.” Moscow, according to the newspaper report.
However, the newspaper says, “The price of a barrel of $ 60 represents a disappointment to some European countries, including the most hawkish pro-Ukrainian countries such as Poland, which wanted to see the Kremlin lose much more revenue from its oil sales.”
And with Russian oil production costs estimated at regarding $20 a barrel – and the price of Russian oil has traded between $60 and $100 a barrel in the past three years – the agreed price still allows Moscow to reap significant profits, according to the newspaper.
While the American analyst, Michael Burnett, said in an interview with Al-Hurra that “Putin knows that he has influence over Europe because of Europe’s energy needs.”
Burnett believed that China continues to keep Putin in the game by buying Russian oil and gas, adding, “As long as China plays this role without consequences, Putin will continue to reduce the impact of Europe’s actions,” as he put it.
Foreign Policy magazine said that observers believe that India, China, Turkey and many other countries will never agree to a price ceiling – and that a non-global oil price ceiling will never work, but nevertheless the magazine says that the goal of non-participating countries is to obtain the lowest price to buy Oil, and that the price ceiling will give them additional leverage in their negotiations with Russia.
