Oil price cap against Russia: Putin launches a counterattack - and is considering radical measures

Created: 2022-12-09 11:27 am

By: Lisa Mayerhofer

Western countries want to push through an oil price cap against Russia.

The Kremlin does not recognize the sanctions - and is now preparing possible reactions.

Moscow – Since Monday (December 5), further sanctions against Russia have been in force: in addition to the EU countries' oil embargo, a price cap for Russian oil exports decided by the West is now in force, which is to be enforced thanks to the market power of Western companies in maritime transport.

The Kremlin announced that it would not recognize the oil price cap.

Kremlin: Three possible reactions to oil price caps

According to media reports, Russia's leadership is now discussing three possible reactions to the price cap for Russian oil.

One option is a complete ban on Russian oil companies selling the raw material to countries that support the price cap, the business

reported in its Wednesday edition.

Specifically, these are the states of the EU and the G7 group of the leading Western industrialized nations.

In this case, indirect purchases via third countries would also be blocked.

The second variant is a ban on contracts in which the upper price limit is fixed.

In this case, it is irrelevant which country is the buyer, it said.

As a third possible countermeasure, a discount limit is being discussed.

This means that sellers of the Russian oil type Urals could not give more than a percentage discount compared to the world market price for the North Sea oil type Brent, which has yet to be determined.

Traditionally, Urals is traded at a discount to Brent in the markets.

New sanctions against Russia: Experts still disagree on the consequences

The EU and G7 have set a price cap of $60 a 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 limit.

Energy Minister Alexander Nowak predicted a significant increase in the price of oil on the world markets due to the restrictions imposed by the West.

In the EU, on the other hand, it is hoped that the upper price limit will lead to relaxation on the energy markets and also relieve third countries.

In addition, it is also intended to ensure that Russia can no longer benefit from rising oil prices and thus fill its war chest.

According to the International Energy Agency, income from oil and gas sales accounted for up to 45% of Russia's state budget last year.

According to EU officials, oil accounted for around 37 percent of total export earnings benefiting the state budget.

The consequences of the new sanctions against Russia for other countries and consumers in this country are not yet foreseeable.

Experts also disagree about the consequences of the decision.