By Jack McEvoy
Russian President Vladimir Putin declared Tuesday that his nation will ban crude oil and petroleum product exports to countries that impose a price cap on Russian crude.
On Dec. 5, the Group of Seven (G7) wealthy democracies, including the U.S., Germany and the U.K., banned Western companies from insuring or shipping Russian oil unless it was sold under $60 a barrel to punish Russia for invading Ukraine while simultaneously bringing down global fuel prices. Putin signed a decree outlining retaliatory measures that will prevent Russian companies from selling oil to the U.S. and other countries that impose a price cap from February 2023, until July, according to the decree. (RELATED: New Sanctions On Russian Oil Could Make Energy Prices Soar Again: REPORT)
“Deliveries of Russian oil and oil products to foreign entities and individuals are banned, on the condition that in the contracts for these supplies, the use of a maximum price fixing mechanism is directly or indirectly envisaged,” the decree states. “The established ban applies to all stages of supply up to the end buyer.”
Putin’s decree was presented as a direct response to “actions that are unfriendly and contradictory to international law by the United States and foreign states and international organizations joining them.” Russian Deputy Prime Minister Alexander Novak also said on Dec. 23 that Moscow may cut its daily crude oil output by up to 700,000 barrels per day in 2023 to respond to the West’s price cap.
Putin told reporters in early December that he would consider cutting oil production in response to the price cap and warned that Europe would suffer a harsh winter due to the cap’s ability to exacerbate soaring energy prices. President Joe Biden banned Russian energy imports in March after Russia invaded Ukraine and on Dec. 5, the European Union also began banning imports of Russian oil that is transported by sea, which could further squeeze global crude supplies, according to CNBC.
Russian Urals oil traded around $56 per barrel on Tuesday, which is $4 below the price cap, while the price of Brent crude, the international oil price benchmark hovered at around $85.10 a barrel, according to Reuters.