On Friday, December 2, European Union, along with G7, after much deliberation agreed to cap the price of Russian seaborne oil at $60 a barrel. Now, in an expected reaction, Russia has refused to accept a price ceiling on Russian oil and has warned of a response. Ukrainian President Volodymyr Zelenskyy has advocated for an even lower cap.
On Saturday, Kremlin spokesperson Dmitry Peskov said that Russia will not accept the price cap and will assess the situation and decide their future course of action.
“We are assessing the situation. We will not accept this price ceiling and once the assessment is over, we will inform you how the work will be organised,” Peskov said.
Russia’s permanent representative to international organisations in Vienna, Mikhail Ulyanov, warned that EU will end up ruing their decision to impose the price cap. He tweeted, “Starting from this year Europe will live w/o Russian oil. Moscow has already made it clear that it will NOT supply oil to those countries who support anti-market price cap. Very soon the EU will blame Russia for using oil as a weapon.”
Starting from this year #Europe will live w/o Russian oil. #Moscow has already made it clear that it will NOT supply #oil to those countries who support anti-market price cap. Very soon the #EU will blame #Russia for using oil as a weapon.
— Mikhail Ulyanov (@Amb_Ulyanov) December 3, 2022
Earlier, following the European Union capped the price of Russian oil at $60 per barrel, the president of the European Union, Ursula von der Leyen took to Twitter to assert that the oil price cap will ‘reduce Russia’s revenues significantly.’
“The EU agreement on an oil price cap, coordinated with G7 and others, will reduce Russia’s revenues significantly. It will help us stabilise global energy prices, benefitting emerging economies around the world,” Leyen tweeted along with a video message.
The EU agreement on an oil price cap, coordinated with G7 and others, will reduce Russia’s revenues significantly.
— Ursula von der Leyen (@vonderleyen) December 2, 2022
It will help us stabilise global energy prices, benefitting emerging economies around the world. pic.twitter.com/3WmIalIe5y
In the video message, Leyen said “As you know the EU and other major G7 partners will have a full import ban on Russian seaborne oil as of December 5. But to ensure that emerging and developing countries continue to have access to some Russian crude oil at limited prices and thus, today the EU, the G7, and other global partners have agreed to introduce a global price cap on seaborne oil from Russia.”
Regarding the objectives of the oil price cap, the European Commission president stated that it will first solidify the effect of EU’s sanctions, secondly, it will reduce Russia’s revenues, and thirdly, it will stabilize global energy markets by allowing some Russian seaborne oil to be traded, brokered, and transported by EU operators to third countries as long as it is sold below the cap.
Notably, earlier several EU member countries like Poland, Latvia, and Lithuania had objected that the proposed $65-$70 per barrel for Russian crude is too modest and far above the rates at which Russia currently sells crude oil.
Russia has been selling its crude oil to several countries at discounted rates since its war began with Ukraine. Among the buyers of the discounted Russian crude during that time, China and India are the biggest buyers purchasing the crude at a 30-40% discount.
Recently, Russia rejected Pakistan’s request to give crude oil at a 30-40% discount, saying that it will not be able to offer anything at present as all volumes are committed.
With the European Union imposing an oil price cap, it will be interesting to see how Russia retaliates and what impact it will have on the global oil market.
