Putin bans sales of Russian oil to countries complying with G7 price cap

Tyler Durden
ZeroHedge
Tue, 27 Dec 2022 19:45 UTC

© Associated Press

Russian President Vladimir Putin

Having promised that it would reveal its response to the recently implemented by the G7 price cap on Russian oil exports, moments ago the Kremlin did not disappoint, and as the WSJ reports, Russian President Vladimir Putin banned the supply of Russian oil and oil products to countries that impose a price cap, allowing deliveries to those nations only on the basis of a special permission from the Kremlin leader.

According to the decree, the retaliatory measures are scheduled to come into effect Feb. 1 and last through July 1, 2023.

Russia's actions are a response to what the decree described as unfriendly actions of the U.S., foreign states and international organizations that contradict international law, and are designed "to protect the national interests of the Russian Federation," the decree said.

The European Union and the U.K. earlier this month banned the import of seaborne Russian crude, while the Group of Seven nations put a ceiling on other sales by barring Western companies from insuring, financing or shipping Russian crude at above $60 a barrel.

And now, Russia has flipped the story on its head, saying the not only will it not sell below $60, but it has banned the sale outright to all countries that engaged in this most glaring virtue-signaling exercise, one which paradoxically was not meant to punish Putin but to keep Russian oil flowing.

While the price cap has not seen a major impact on pricing so far, that will likely change soon: As shown below, Urals oil is trading with a generous discount to spot Brent, and was last seen around $50.

In other words, those nations buying Urals - mostly China and India - are not violating the G-7 pact... yet. However, once Urals follows Brent higher, and its price rises above $60/barrel that will change, and at that point it will be interesting to see how the G7 responds to the two fastest growing economies and two most populous nations openly defying the G7's Russian oil price floor.

The news, which was largely as expected, has not had an impact on the price of oil with WTI and Brent both trading at three week highs following news that China was ending zero-covid policies and reopening its economy.

As for the US stepping in a providing emergency cover to nations who may be caught in the crossfire, sorry - Joe already drained a third of the SPR to get Democrats reelected.

Comment: And from RT:

The president can grant special permission for the supply of oil and oil products prohibited by the price ceiling, according to the decree. The Russian Ministry of Energy will monitor compliance with the presidential order on retaliatory measures.

The $60-per-barrel price cap on Russian seaborne oil exports was introduced by the EU, G7 countries, and Australia on December 5. It bans Western companies from providing insurance and other services for Russian oil shipments unless the cargo is purchased at or below the set price.

The Kremlin vowed to respond to the measure in a way that would best serve Moscow's interests, warning it would not trade with nations that support the price ceiling. Deputy Prime Minister Aleksandr Novak said that Russian oil will still be in high demand despite the latest sanctions on the country's exports. By imposing a price cap, Western countries will only trigger further energy inflation due to scarce supply, the minister said, adding that Russia views such types of non-market mechanisms as unacceptable.

Expect a lot of backroom deals which Russia will surely configure to its advantage, as energy-strapped countries (looking at you, EU) wake up to the long-term reality. Given the five-month time frame of the embargo, it appears Russia feels it won't take much time to make its point.