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This Monday, December 5, two measures designed by the West came into force to limit the income of the Kremlin which, they denounce, have served in the last ten months to finance the war in Ukraine: a veto on maritime oil exports and a cap on its price.
For the G7, the European Union and Australia, the latest sanctions against Russia could be one of the most painful since the invasion of Ukraine began. For the Kremlin, however, it is nothing more than a new provocation.
A ban on maritime exports of Russian oil from the European Union and its allies, including Australia and the G7 countries (Germany, Canada, the United States, France, Italy, Japan and the United Kingdom) came into effect on Monday.
In addition, a cap of 60 dollars was agreed on the price paid for that crude.
Vladimir Putin’s government spokesman Dmitry Peskov said Russia was preparing a response and attempts by rivals to squeeze its energy revenues would not affect the military effort in Ukraine.
“Right now a decision is being prepared, but what is clear is that we will not accept any price cap (…) What is obvious and indisputable is that making these decisions is a step towards destabilizing world energy markets,” Peskov told the media on Monday.
The cap measure on Russian oil prices does not prevent other countries from continuing to import hydrocarbons from that country transported by sea, but it does prohibit transport, insurance and reinsurance companies from handling shipments of Russian crude unless it is sold at less than $60 a barrel.
Prices rise due to uncertainty about supply
These twin measures applied against Russia could have an uncertain effect on the oil market in the short term, as there are concerns about the loss of supply and that drives prices up, but at the same time there are fears about lower demand in a slowing global economy. .
In the short term, the effect has been reflected in a rise in oil prices of up to 3% on Monday, driven not only by the veto on Russia, but also by the decision of the OPEC+ nations to keep its production targets stable, which include a reduced supply until 2023.
Both the benchmark WTI and Brent barrel prices traded above $80 midday, settling at a gain of just over a dollar after rising more than $2 a barrel.
At the same time, in a positive sign for crude demand in the world’s top importer, more Chinese cities eased Covid-19 restrictions over the weekend.
With Reuters and AP
