President Vladimir Putin has delivered Russia’s long-awaited response to a Western price cap, signing off on a five-month ban on the supply of crude oil and oil products to nations that impose the cap.
- Russia has banned G7 countries from crude oil exports, beginning February 1
- The move follows the G7 price cap, aimed at crippling Moscow’s military efforts in Ukraine
- Mr Putin will be able to overrule the ban in special cases
The Group of Seven major powers, the European Union and Australia agreed this month to a $US60 ($89)-per-barrel price cap on Russian seaborne crude oil effective from December 5 over Moscow’s “special military operation” in Ukraine.
The decree, published on a government portal and the Kremlin website, 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 organisations joining them”.
“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 stated, referring specifically to the United States and other foreign states that have imposed the price cap.
The decree, which includes a clause that allows for Mr Putin to overrule the ban in special cases, stated: “This … comes into force on February 1, 2023, and applies until July 1, 2023.”
Crude oil exports will be banned from February 1, but the date for the oil products ban will be determined by the Russian government and could be after February 1.
The price cap, unseen even in the times of the Cold War between the West and the Soviet Union, is aimed at crippling Russian state coffers and Moscow’s military efforts in Ukraine.
Finance Minister Anton Siluanov said on Tuesday (local time) that Russia’s budget deficit could be wider than the planned 2 per cent of GDP in 2023, with the oil price cap squeezing export income, an extra fiscal hurdle for Moscow as it spends heavily on its military campaign in Ukraine.
However, some analysts have said the cap will have little immediate impact on the oil revenues that Moscow is currently earning.