Russia debates retaliation options over oil price cap decision

By Al Mayadeen English
Source: Agencies
7 Dec 2022 09:27
1 Shares

Following a decision by the EU, G7, and Australia to set a price cap on Russian oil, Russia mulls retaliatory options.

Russian Deputy Prime Minister Alexander Novak (TASS)

Alexander Novak, the deputy prime minister of Russia, issued a warning earlier this week that the price cap on Russian oil will only result in a decline in international investments in the sector, which will then cause prices to rise.

According to Russian media, Moscow is exploring three ways to counter the EU and G7's imposition of a price cap on Russian oil.

The first scenario calls for a complete ban on the sale of Russian crude to those countries, including G7 members, who backed the price cap, regardless of whether they obtained the oil from Russia directly or through intermediaries, according to a number of unnamed sources close to the government as cited by Russian media.

According to the sources, the second alternative calls for a prohibition on oil exports under contracts with price cap-related clauses, regardless of the nation that acts as the recipient.

Furthermore, it was noted that a measure including an "indicative price" may be imposed under the third scenario. This price establishes the maximum discount for Russian Urals oil over Brent crude, and any possible agreement will be rejected if the discount is raised

It is worth highlighting that sources also stated that "other alternative options or a combination of them" are also on the table without going into further detail.

Peskov responds to Scholz, Macron; price cap won't affect operation

Kremlin Spokesperson Dmitry Peskov affirmed on Monday that the introduction by the West of an oil price ceiling will not affect the financing of the war in Ukraine.

"Russia, the Russian economy, has the necessary potential to fully meet all needs and requirements within the framework of the special military operation, and such measures [as oil price cap] will not affect it," Peskov said.

He mentioned that the cost of Russian oil after the introduction of the price cap will change, pointing out that this was a step toward destabilizing global energy markets.

"[The price] will change. One thing is clear and undeniable: the adoption of these decisions is a step towards destabilizing global energy markets," Peskov told reporters when asked if Europeans and the world should prepare for higher prices, as the US convinces allies that nothing will change.

Last week, the European Union reached an agreement on setting a price cap on Russian oil at $60 per barrel, which went into effect on Monday.

The cap will be reviewed every two months to remain at 5% below the International Energy Agency benchmark. The G7 nations and Australia also agreed that same day to set a $60 price ceiling on oil from Russia.