Russia to respond to West's oil price cap in few days: Peskov

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Russia will respond to the West's introduction of a price cap on oil by a decree in the coming days, Kremlin spokesman Dmitry Peskov said on Monday.

"I want to remind you that in Bishkek, [Russian] President [Vladimir Putin] said that there would be a relevant decree, and the president also said that there are still some aspects that are being discussed. In the coming days, this discussion will be finalized and already institutionalized in the form of a presidential decree," Peskov told reporters when asked if Moscow was ready to respond to the introduction of a price cap.

On December 1, the European Union reached an agreement on setting a price cap on Russian oil at $60 per barrel, which went into effect last 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.

Starting from February 5, 2023, the European Union will be introducing a price cap for Russian refined products as well.

Reactions toward the price cap on Russian oil

Russian Foreign Ministry Spokesperson Maria Zakharova slammed the EU's attempt, saying, "The Group of 7’s plan to set a voluntary price ceiling on oil again proves that the principles of a market economy are alien to Brussels and Washington." 

Russian President Vladimir Putin said the price cap on Russian oil, proposed by the West weeks ago, corresponds to the current oil prices, and it does not affect Russia. He further underlined that Russia will not incur any losses in the wake of the price cap being introduced under no circumstances, further highlighting that Moscow would not be selling oil to unfriendly countries imposing price caps on it.

Saudi Energy Minister Prince Abdulaziz bin Salman considered on Sunday that the impact of European sanctions and the G7 imposed price cap on Russian oil "did not bring clear results yet."

He indicated that Moscow's response to these tools needed to be taken into consideration when looking at the state of play in global markets.

Referring to the price cap imposed on Russian crude oil, Prince Abdulaziz pointed out that "these tools were created for political purposes and it is not clear yet whether they can achieve these political purposes."

According to a European official who did not see the Kremlin's warnings to stop deliveries as a threat, "Russia must retain an interest in selling its oil" or face the risk of diminishing global supply, leading to more price spikes. 

In light of that, Ukraine suggested on Saturday that the price cap should have been set lower than $60, as it is "insufficient" to penalize Russia. The $60 price cap imposed is not "serious", Ukrainian President Volodymyr Zelensky said Saturday, explaining that the decision was "quite comfortable" for Moscow.

Poland was particularly staunchly opposed to the price cap being set this "high" trying to hold out for a lower level of $30 before finally agreeing to the $60.

Russia's Permanent Representative to International Organizations in Vienna, Mikhail Ulyanov, declared earlier in the day that the European Union will have to live without Russian oil starting this year as a repercussion of the price cap imposed on the country's oil.

German Foreign Minister Annalena Baerbock stated on December 4 that her country desires to see its global partners oblige by the price cap decision on Russian oil regardless of being officially a part of it.

In response to a question about whether the foreign minister is going to address India's increasing imports of Russian oil after the price cap decision, Baerbock replied that Germany knows that "many states have different economic constraints," however she said she urges their partners to join the sanctions on Russia.

Indian Oil Minister Hardeep Puri said his country was not concerned about the price cap imposed by the European Union on Russian oil, stressing Delhi's intention to "continue buying crude from Moscow at the present time."

India has defended its continued purchases of Russian oil, saying it is part of a long-term bid to diversify its supplies and arguing that an abrupt halt to imports would send global prices up the roof and negatively impact domestic consumers.

The US welcomed reports that the European Union has reached an agreement on imposing a price cap on Russian oil. "We see the reports and it is welcome news that they're coming together towards a price cap," according to White House National Security Council Spokesperson John Kirby.

The US welcomed the European Union's decision to join the G7 in imposing a $60-per-barrel price cap on Russian oil exports, saying it will slow the Kremlin's "war machine".

Baltic nations have recently expressed opposition to the idea that a price cap should be set above $50 per barrel. They believe that the price remains too high and that could potentially fuel profits for Russia, thus harming Ukraine.

It is worth noting that the recent price cap on Russian crude oil enforced by the EU has been interrupting tanker movement and maritime transport. This comes after Turkey's request for proof of insurance from Russian oil tankers impeded movement in the Bosphorus and Dardanelles straits and further into international markets.

The Financial Times recently reported that Russia has assembled more than 100 vessels using non-Western insurers and intends to sell oil at higher prices to countries that have not partaken in the new sanctions package.

The West's plans

Western nations have been trying to find ways to reduce Russia's income from oil and gas exports since the start of the war in Ukraine.

In October, the EU introduced the eighth package of sanctions against Moscow, which included a legislative basis for setting a price cap for maritime shipments of Russian oil to third countries.

Russia had pledged to stop exporting its oil to countries that would apply price caps on its oil.

Meanwhile, those who violate the price cap on Russian oil exports will suffer consequences under the domestic law of the jurisdictions enforcing the quota, according to US Deputy Treasury Secretary Wally Adeyemo.