Russia has hit back at efforts by the G7 to limit profits from the country’s oil revenues after Vladimir Putin signed a decree banning sales under contracts to comply with the $60 price ceiling imposed by Ukraine’s Western allies.
A decree signed by Russia’s president and published on Tuesday said the Kremlin would ban sales of the country’s crude and crude oil-related products under agreements that “directly or indirectly imply a price cap mechanism.”
However, the Ordinance states Putin The wording paves the way for Russia to continue selling crude to producers in markets such as India and China, even if the buyers comply with the limit by “granting special permission” to sell oil and oil products under certain circumstances.
The price cap, imposed in early December, is aimed at reducing funding for the Kremlin’s invasion of Ukraine. Oil And gas revenue accounts for almost half of Russia’s budget. In practice, the cap still doesn’t fit, as Russia’s main crude blend, the Urals, sells for less than $60 a barrel.
Russia has blocked a G7 move aimed primarily at insurance for oil exports. “Shadow Fleet” of Ships It continues to send its oil in return.
Ten days after the cap came into effect, the Financial Times reported that at least seven crude oil tankers were sailing from Russia to India with Western insurance, in what appeared to be trade enabled under G7 price cap rules.
Putin’s move is less severe than the more drastic options for retaliation in the Russian media, such as “lower” oil prices or a minimum discount level for its sale.
The Kremlin decree takes effect on February 1 and will remain in effect for five months, while a date for a similar move on oil products is yet to be determined.
Putin called the G7’s move “stupid and premature” in December, noting that the Urals were already selling at a discount to Brent, the global benchmark.
After the West stopped buying Russian oil and gas following the invasion of Ukraine in early February, the Urals were typically sold below the cap. Russia has offered generous rebates to its oil importers. India and China.
Currently, Russia sells nearly 80 percent of its crude oil to Asia and 17 percent to Europe, two-thirds of which is transported through the Druzhba pipeline, according to figures from data provider Kpler.
In the 10 months since Putin launched his invasion of Ukraine, the spread of Urals crude oil against Brent has widened from a benchmark of $1 to $2 to the current level of $20 to $30 a barrel.
Even at $60, the cap is close to the $70-a-barrel price on which Russia’s 2023 budget is based, raising doubts about the cap’s effectiveness in curbing the Kremlin’s fossil fuel revenues.