By Alexander Marrow and Vladimir Soldatkin
MOSCOW (RockedBuzz via Reuters) – President Vladimir Putin provided Russia’s long-awaited response to Western price caps on Tuesday, signing a decree banning supplies of crude oil and petroleum products from February 1 for five months to nations that meet the cap. .
The major powers of the Group of Seven, the European Union and Australia agreed this month on a maximum price of $60 a barrel for Russian seaborne crude effective from December 5 in connection with Moscow’s “special military operation” in Ukraine.
The ceiling is close to the current price of Russian oil, but well below the extraordinary price Russia has been able to sell this year and this 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 to its sales would have far-reaching consequences for global energy supplies.
The decree, published on a government portal and on the Kremlin website, was presented as a direct response to “hostile actions and contrary to international law by the United States and foreign states and international organizations that adhere to them”.
“Deliveries of Russian oil and petroleum products to foreign individuals and individuals are prohibited, provided that the use of a mechanism for fixing the maximum price is directly or indirectly provided for in the contracts for such supplies,” the decree reads, referring in particular to the United States and other foreign states that have imposed the price cap.
“The established ban applies to all stages of the supply up to the final purchaser.”
The decree, which includes a clause that allows Putin to lift the ban in special cases, says: “This … enters into force on February 1, 2023 and applies until July 1, 2023.”
Crude oil exports will be banned from February 1, but the date for the ban on petroleum products will be determined by the Russian government and could be after February 1.
The price cap, never seen even at the time of the Cold War between the West and the Soviet Union, aims to paralyze the coffers of the Russian state and Moscow’s military efforts in Ukraine.
Some analysts said the cap will 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 expected 2% of GDP in 2023, with the oil price ceiling squeezing export earnings, an additional fiscal hurdle for Moscow spending a lot on its military campaign in Ukraine.
Russia has been vowing to respond officially for weeks, and the eventual decree largely established what officials had already said publicly.
The G7 price cap allows non-EU countries to continue importing seaborne Russian crude, but will ban shipping, insurance and reinsurance companies from moving cargoes of Russian crude around the world unless it is sold at a price lower than the maximum price.
EU countries have separately implemented an embargo prohibiting them from buying Russian seaborne oil.
Russian Ural oil traded above $56 a barrel on Tuesday, below its price high.
Brent crude moved a little higher on the news and was up 1.4% to $85.1 by 17:43 GMT.
(Reporting by Alexander Marrow and Vladimir Soldatkin; Writing by Alexander Marrow; Editing by David Evans, Mark Heinrich and Frank Jack Daniel)