Russian oil price cap, EU ban aim to limit Kremlin’s war chest

FRANKFURT – Oil prices rose on Monday first strong measures to limit Russia’s oil profits about the war in Ukraine came into effect, bringing uncertainty about how much crude oil could be lost to the world economy through the new sanctions or Russian retaliation.

International benchmark Brent rose 2% to $87.30 a barrel, a day after the OPEC+ alliance of oil producers, including Russia, no changes were made to the benefit plans because the impact of the new restrictions on Russian oil is not yet clear. From Monday, the European Union will impose an embargo on most Russian oils and a Price cap of $60 per barrel on Russian exports to other countries imposed by the Group of Seven Democracies and the EU.

The EU ban on Russian oil shipments by sea is “by far the biggest step yet to cut off the fossil fuel export revenues that fund and enable Russia’s barbarism invasion of Ukrainesaid Lauri Myllyvirta, senior analyst at the Finland-based Center for Research on Energy and Clean Air.

“It took a long time to get here – but this is arguably one of the strongest reactions to Putin’s war in Ukraine,” tweeted Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels.

Western leaders walk a fine line between attempting to slash Russia’s oil revenues and preventing an oil shortage that would cause prices to rise inflation-plagued economies worsen and hurting consumers around the world. But Russia has said it will not sell oil to countries that comply with the cap, which could take oil off global markets increase energy costsalso for petrol at the pump.

asked Kremlin spokesman Dmitry Peskov in a conference call how the oil price ceiling might affect the warsaid: “The economy of the Russian Federation has the necessary potential to fully meet all the needs and requirements within the framework of the special military operation, and such measures will not affect it.”

The US, EU and allied countries have hit Russia with a series of sanctions targeting banking and financial transactions, technology imports and individuals associated with the regime. But so far, for the most part, those sanctions haven’t gone right after Kremlin’s biggest moneymaker, oil and natural gas.

Europe was heavily dependent on Russian oil and natural gas before the war and had to struggle to find new supplies. Earlier, the EU banned imports of Russian coal and the US and UK halted their limited imports of Russian oil, but these moves had a much smaller economic impact.

Even when Western customers avoided Russian oil, the higher prices pushed through Fear of lack of energy helped offset lost oil sales, and Russian exporters have adjusted Shipping more oil to India, China and Turkey in a major restructuring of global oil flows. Russia’s economy has shrunk – but not as much as many expected at the start of the war nearly 10 months ago.

One unknown is how much of the oil formerly sold to Europe can be diverted. Analysts believe many, but not all, of these Russian casks will find new homes in the coming months, causing supply shortages and raising prices.

Indian Foreign Minister Subrahmanyam Jaishankar indicated on Monday that the country would do so Keep buying oil from Russia prioritize your energy needs. So far, India has not committed itself to the G-7’s upper price limit either.

The cap has a grace period for oil loaded before Monday and arriving at its destination before Jan. 19 to minimize disruption to oil markets.

The price cap would work by preventing insurers or shipowners from shipping Russian oil to non-Western countries unless the oil was below the cap. Most of these companies are based in the EU or the UK, which means they face a number of restrictions.

The idea is to keep Russian oil flowing while reducing Kremlin revenues, although the immediate damage could be limited as Russian oil was already being traded where the cap was set. The US and Europe opted for it rather aimed at preventing a price increase than to provoke financial hardship in Russia, although the ceiling could be tightened later.

European Commission Vice-President Frans Timmermans said on Monday: “We agree that we should not disrupt international oil markets. That wouldn’t help us either.” That’s why the EU has decided that “the right price” is $60 a barrel.

Ukrainian President Volodymyr Zelenskyy had called for a cap of around $30 a barrel. That would be close to Russia’s cost of production, so Russian oil companies could earn just enough to avoid shutting down wells that are difficult to get back on track. Russia needs about $60 to $70 a barrel to balance its budget.

A joker is Russia’s answer. If it makes good on the threat not to sell oil to countries that comply with the cap, it could limit supply and raise prices, benefiting Russia to the extent it can circumvent the restrictions.

Russia could use methods used by Iran and Venezuela to circumvent sanctions, such as B. the use of “dark fleet” tankers of unclear ownership and ship-to-ship transfers of oil to tankers with oil of similar quality to disguise its origin. Russia or China could also organize their own insurance. Sanctions experts say these moves will impose higher costs on Russia.


AP reporters Raf Casert in Brussels and Sheikh Saaliq in New Delhi contributed.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission. Russian oil price cap, EU ban aim to limit Kremlin’s war chest

Sarah Y. Kim

InternetCloning is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – The content will be deleted within 24 hours.

Related Articles

Back to top button