- Russia will not sell oil subject to a price cap
- Russia is working on a mechanism to ban the price cap
- Russia would rather accept production cuts
- West imposes a $60/barrel cap on Russian sea crude
MOSCOW, December 4 (Portal) – Russia, the world’s second-largest oil exporter, will not sell oil subject to a Western price cap even if it has to cut production, President Vladimir Putin’s energy chief has said.
The Group of Seven and Australia agreed on a price cap of $60 a barrel for Russian sea crude on Friday after European Union members overcame opposition from Poland.
The West’s move to ban shipping, insurance and reinsurance companies from handling cargoes of Russian crude above the cap is an attempt to punish Putin for the Ukraine conflict.
Russian Deputy Prime Minister Alexander Novak said on Sunday the West’s move was gross interference, contrary to free trade rules and would destabilize global energy markets by triggering supply shortages.
“We are working on mechanisms to ban the use of a price cap instrument, whatever level is set, as such interference could further destabilize the market,” said Novak, the country’s government official in charge of oil and gas, nuclear energy and coal .
“We will only sell oil and petroleum products to those countries that cooperate with us on market terms, even if we have to reduce production a little,” he added.
Novak said the western cap could trigger problems in product markets and affect other countries besides Russia.
‘FROZEN’
It is unclear what immediate impact, if any, the western cap will have on Russian oil flows since the discount to Brent for Russian blends has widened so significantly.
The Ural compound traded at around $61.3 a barrel – just over a dollar above the cap level. Brent crude oil futures closed at $85.57 a barrel on Friday.
Selling oil and gas to Europe has been a major source of Russian foreign exchange earnings since Soviet geologists found oil and gas in the Siberian swamps in the decades after World War II.
A source, who asked not to be identified due to the sensitivity of the situation, told Portal that a decree is being prepared to ban Russian companies and traders from interacting with countries and companies guided by the cap.
In essence, such a decree would ban the export of oil and petroleum products to countries and companies that apply it.
Since ordering the military operation in Ukraine on February 24, Putin says the United States and its allies have launched an economic war against Russia with the heaviest sanctions in modern history and warns they will face an energy crisis.
Putin warned the West in September that he could cut off energy supplies if price caps were introduced, telling them Europe would be “frozen” like a wolf’s tail in a well-known Russian fairy tale.
Russia has access to enough tankers to ship most of its oil beyond the reach of a new G7 price cap, industry players and a US official told Portal in October, underscoring the limitations of the most ambitious plan yet to curb Moscow’s wartime revenues.
Portal reporting; Adaptation by Guy Faulconbridge and Alexander Smith
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