Export ban on countries that cap price of Russian oil

MOSCOW, 28 Dec 2022:

President Vladimir Putin yesterday signed an executive order barring exports of oil and petroleum products to countries seeking to impose a cap on the price of Russian crude.

The G7 – the US, Japan, Germany, France, Italy, UK and Canada – and the EU have set a maximum price of US$60 a barrel for Russian oil in retaliation for Moscow’s invasion of Ukraine.

Prices for the global benchmark crudes ranged from US$79 to US$84 a barrel yesterday.

EU and US officials have said they are ready to punish traders and shippers deemed to be helping Russia circumvent the measure.

“This Executive Order was signed in response to the unfriendly actions taken by the United States, other foreign states and international organisations that sided with them, to establish a price cap on Russian oil and oil products, which is in violation of international law,” Putin’s office said in a statement.

The prohibition on sales of crude takes effect on 1 Feb 2023, while the ban on exports of oil derivatives will go into force on that date or later, as determined by the Russian government.

Putin’s order will be valid until 1 July 2023.

“Russia bans the sale of oil and oil products to foreign companies and individuals if the contracts on these sales include the use of this (price limit) mechanism directly or indirectly. The established ban applies to all stages of sales up to and including the final buyer,” according to the Kremlin website.

Sales banned by the Executive Order “may be carried out under a special decision of the President of the Russian Federation,” the statement said.

During a press conference last Thursday in Moscow, Putin described the oil price cap as “a remnant of colonialism.”

“They are used to robbing other countries,” the Russian leader said of the West. “An attempt at non-market regulation in the economy is the same colonial robbery.”

He also warned that attempt to impose “administrative” control of prices could destroy the global energy market.

“There may come a time when the under-invested industry will no longer provide the market with the required volume of products. And then prices can skyrocket. And they will hurt those who are trying to implement these tools,” Putin told reporters.

A day after the president spoke, deputy prime minister Alexander Novak said Russia is weighing a reduction of 500,000-700,000 barrels per day in oil output in early 2023 due to G7 price cap.

He said in an interview with Rossiya-24 television that potential cut would amount to around 6% of Russia’s current production.