Russian Deputy Prime Minister Alexander Novak said today that the move by the West is a blatant intervention that goes against the rules of free trade
THE Russiathe world’s second largest oil exporter, will not sell oil subject to a Western price ceiling even if it has to cut output, President Vladimir Putin’s closest energy ally said today.
The Group of Seven (G7) and Australia agreed on Friday to a price ceiling for seaborne Russian crude at $60 a barrel after European Union member states overcame resistance from Poland.
The move by the West is an attempt to punish Putin for the war in Ukraine.
Russian Deputy Prime Minister Alexander Novak said today that the West’s move is a blatant intervention that goes against the rules of free trade and will destabilize global energy markets by causing supply shortages.
“We are working on mechanisms that will prohibit the use of the price ceiling tool, no matter at what level it is set, because this intervention could further destabilize the market,” said Novakwho is the Russian government official in charge of the country’s oil, gas, nuclear energy and coal.
“We will sell oil and oil products only to those countries that will work with us on market terms, even if we are forced to reduce production a little,” he added.
Novak said the Western ceiling could disrupt commodity markets and affect countries other than Russia.
It is unclear what, if any, the immediate impact of the western cap will be on Russian oil flows because Brent’s discount to Russian blends has widened considerably.
Urals blend was trading around $61.3 a barrel – just over a dollar above the ceiling. Brent futures closed at $85.57 on Friday.
Selling oil and gas to Europe is one of the main sources of foreign exchange for Russia after Soviet geologists discovered oil and gas in the Siberian swamps in the decades following World War II.
A source, who asked not to be named because of the sensitivity of the situation, told Reuters the measure was prepared to ban Russian companies and traders from interacting with countries and companies guided by the cap.
In essence, such a measure will ban the export of oil and petroleum products to countries and companies that implement it.
After ordering the military operation in Ukraine on February 24, Putin says the United States has launched an economic war against Russia with the toughest sanctions in modern history, warning that the West will face an energy crisis.
In September, Putin warned the West that he could not cut off energy supplies if price caps were imposed, saying Europe would “freeze” like a wolf’s tail, as a well-known Russian fairy tale goes.
Russia may have access to enough tankers to move most of its oil beyond the reach of a new G7 price cap, industry players and a US official told Reuters in October, underscoring the limits of the most ambitious plan yet today to cut Moscow’s wartime revenues.
RES-EMP
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