According to media reports, Russia’s leadership is discussing three possible reactions to the Russian oil price cap introduced by the West. One option is a complete ban on Russian oil companies selling the commodity to countries that support the price cap, the Vedomosti business daily reported (Wednesday edition).
Specifically, these are the states of the EU and the G-7 group of major western industrialized nations. In this case, indirect purchases via third countries would also be blocked.
The second variant is a ban on contracts where the maximum price cap is fixed. In that case, it is irrelevant which country is the buyer, he said.
As a third possible countermeasure, a discount cap is being discussed. This means that sellers of the Russian Urals grade of oil could not give more than a percentage discount yet to be determined compared to the world market price for the North Sea Brent grade. Traditionally, the Urals trade on the markets at a discount to Brent.
Unclear price cap consequences
The EU and the G-7 have set a price cap of $60 per barrel for Russian oil. This is below the current market price. The Russian leadership recently made it clear that under no circumstances would they submit to this upper price cap.
Energy Minister Alexander Nowak predicted a significant rise in the price of oil on world markets due to restrictions imposed by the West. Experts are still divided on the consequences of the decision.
Delayed shipping apparently not because of the price cap
According to representatives of the G-7 countries, the congestion in tanker traffic from Russian Black Sea ports to the Mediterranean is not a result of the Russian oil price cap, but due to a new Turkish insurance regulation.
Of the 20 affected tankers, all but one appear to be carrying Kazakh – not Russian – oil and would fall below the price cap “under no conceivable scenario”.
This was explained by a person familiar with the subject from G-7 circles. “The price cap does not require ships to seek insurance guarantees for each individual voyage, as required by Turkish regulations,” several government officials said. “The outages are a result of Turkey’s regulation, not the price cap policy.”