Russian President Vladimir Putin is taking retaliatory measures against the West’s price cap on its crude exports.
On Tuesday, Putin signed a presidential decree banning all oil shipments into countries preparing to exercise the EU’s agreed-upon $60 price cap on Russian crude. The move also bans petroleum product deliveries even if the contracts don’t directly specify the price cap. The decree, which was posted on the Russian government’s website, didn’t specify when the embargo is scheduled to take effect, but will likely be in line with the EU’s price ceiling thats supposed to go live on February 1, 2023.
The Russian Ministry of Energy will be in charge of monitoring compliance with Putin’s order. The President— under special circumstances— holds the right to permit oil shipments to regions otherwise exercising the price ceiling. The $60 price cap was imposed by the EU, G7 members, and Australia on December 5, banning countries from issuing insurance services for shipments of Russian crude products if they were purchased for a price above the agreed-upon ceiling.
Putin promised to respond to the western coalition’s price limit in such a way that still favours Russian interests. Deputy Prime Minister Aleksandr Novak insisted that Russian crude will still be sought after even amid the sanctions. In fact, he warned that the West is only shooting itself in the foot by triggering even higher energy inflation due to subdued supply. “This can only lead to a global decline in investment and a future shortage of relevant resources. This, in turn, will cause an even greater increase in prices, which we are seeing, including the gas markets, for example, where there was an artificial decision to limit long-term contracts.”
Information for this briefing was found via the Government of Russia and TASS. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.