Oil price cap system QA energy weaponization Russia’s counterattack from the West

Aiming to weaken the power of war by cutting off Russian funding lines… The specific amount is undecided
China and India likely not to participate… Russia likely to diversify export destinations and pressure with gas

The war in Ukraine, which began with the Russian invasion in February, has sparked a global ‘energy war’.

When Europe decided to ban the import of Russian crude oil as one of the sanctions, Russia temporarily cut off gas to Europe or drastically reduced its supply due to equipment problems and inspections.

Europe, which relied on Russian gas, is expected to experience harsh winters due to energy shortage. decided to do

In response, Russian President Vladimir Putin warned on the 7th that it would not export oil and gas to countries that participate in the US-led cap on Russian oil prices.

The European Union countered that it would introduce a price cap on Russian gas, regardless of Russia’s threat.

— Why did the West bring up the oil price cap?

▲ This is to make the economy difficult by lowering the price of crude oil and petroleum products, which are Russia’s ‘cash lines’.

Tightening the funds flowing into Russia will inevitably weaken the power to carry out the war.

The judgment that Western sanctions once morest Russia were not working properly also contributed to the promotion.

If Russian crude oil is distributed at a relatively low price, the rise in international energy prices can also be suppressed.

Russian crude oil is still $63-73 per barrel (regarding 87,000-100,000 won), 20-30 dollars cheaper than Brent oil (regarding 27,000-41,000 won).

By setting a price that is slightly higher than the unit price of crude oil as the upper limit, it is possible to achieve the effect of reducing Russia’s profits and controlling world oil prices.

— The specific method.
It is a method of providing maritime transportation services only when Russian crude oil and petroleum products are purchased at a certain price or less.

It is a kind of collusion between consumers.

The G7 controls regarding 90% of the global marine insurance market.

If Russia wants to export crude oil to circumvent the oil price cap, it will have to find intermediaries and shipping and insurance companies that are not connected to the West.

The implementation date is the same as the day the EU begins to ban imports of Russian crude oil and petroleum products.

It is December 5th for crude oil and February 5th for petroleum products.

However, the price, which can be said to be the core of the upper limit system, has not yet been determined.

It is decided by all participating countries on the basis of technical figures and may be readjusted according to circumstances.

–Does Korea participate?

▲ Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho met with US Treasury Secretary Janet Yellen, who visited Korea in July, and expressed her intention to participate.

At the time, Deputy Prime Minister Choo promised, “I agree with the purpose of the introduction and am willing to participate.”

On the 7th, Russia mentioned Korea and warned that “participating in the oil price cap system will lead to serious negative consequences for the Korean economy.”

— Did Russia’s crude oil exports decline following the Ukraine war?

▲ Although it has decreased slightly, it is not enough to seriously damage the Russian economy.

Before the war, Russia exported an average of 8 million barrels per day in January, down slightly to 7.4 million barrels per day in July.

Exports to the US, UK, EU, Japan and South Korea fell by 2.2 million barrels per day, but China and India made up for the decline by actively buying Russian crude, which is cheaper than the world average.

The International Energy Agency (IEA) believes that if the EU starts embarking on a ban on Russian crude oil in December, exports of 1.3 million barrels a day will be blocked.

Still, Russia is expected to generate 265 billion dollars (regarding 336 trillion won) in imports from energy exports this year.

— Will the oil price cap work?

▲ There are a lot of people who doubt its effectiveness.

The British media The Economist pointed out that the shortcomings of the oil price cap are that Russia can sell crude oil and petroleum products through countries that do not participate in sanctions, and that the G7’s share in the global economy is decreasing.

China, India, and Indonesia, which have emerged as economic powers, are taking their own steps instead of joining the Western sanctions once morest Russia.

If the West tries to impose sanctions on these countries for violating the oil price cap, it might face considerable backlash.

Moreover, Russian crude oil is already cheap.

Russia may choose whether or not to apply the cap system depending on the export period and destination country.

If Russia presses Europe with gas as a weapon, as President Putin said, the solidarity of countries participating in the cap system may weaken.

— The EU said it would set an upper price limit for Russian gas.
▲President Putin said on the 7th that he would not export gas and crude oil to countries participating in the oil price cap system.

It is expected to be discussed at the EU Energy Ministers’ Meeting to be held on the 9th.

/yunhap news