President Vladimir Putin on Tuesday delivered Russia’s long-awaited response to the Western price ceiling, signing a decree banning the supply of crude oil and oil products from February 1 for five months. for countries to comply with the ceiling.
The Group of Seven, the European Union and Australia this month agreed to a price ceiling of US$60 per barrel for Russian seaborne crude, effective December 5 for ” Moscow’s special military operation in Ukraine.
The ceiling is close to the current Russian oil price, but far below the unexpected price Russia could sell this year, and that has helped offset the impact of financial sanctions on Moscow.
Russia is the world’s second-largest oil exporter after Saudi Arabia, and a major disruption in its sales would have far-reaching consequences for global energy supplies.
The decree, published on the government portal and the Kremlin’s website, is seen as a direct response to “unfriendly actions and contrary to international law by the United States and other countries.” as well as the international organizations joining them.”
“The delivery of Russian oil and oil products to foreign organizations and individuals is prohibited, provided that in the contracts for the supply of these supplies the use of the maximum price fixing mechanism is envisaged. directly or indirectly,” the ordinance states, specifically referring to the United States and other foreign countries that have imposed price ceilings.
“The established moratorium applies to all stages of supply up to the final purchaser.”
The decree, which includes a provision allowing Putin to waive the ban in exceptional circumstances, states: “This… takes effect on February 1, 2023 and applies until July 1. in 2023.”
Crude oil exports will be banned from February 1, but the date of banning petroleum products will be decided by the Russian government and possibly after February 1.
The price ceiling, unheard of even during the Cold War between the West and the Soviet Union, is aimed at crippling Russia’s state treasury and Moscow’s military efforts in Ukraine.
Some analysts have said that the ceiling would have little immediate impact on the oil revenues Moscow is currently earning.
However, Finance Minister Anton Siluanov said on Tuesday that Russia’s budget deficit could be larger than 2% of GDP projected in 2023, with oil prices constraining export earnings, a additional financial hurdle for Moscow as it spends heavily on its military campaign. in Ukraine.
Russia has been promising a formal response for weeks, and the final decree established much of what officials have said publicly.
The G7 price cap allows non-EU countries to continue importing Russian crude by sea, but it would ban shipping, insurance and reinsurance companies from handling Russian crude shipments globally. , unless it is sold for less than the ceiling price .
The EU countries have implemented a separate embargo banning them from buying oil transported by sea from Russia.
Russia’s Urals oil traded above $56 a barrel on Tuesday, below the price ceiling.
Brent crude edged slightly higher on the news and was up 1.4% to $85.1 by 1743 GMT.