Ukraine believes that this will “destroy” the Russian economy. A broad coalition of Western countries agreed on Friday to limit the price of Russian seaborne oil to $60 a barrel.
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Ukraine is convinced that the imposition of a price cap on Russia’s oil by Western powers will sink the economy of the world’s second-biggest crude exporter. “Russia’s economy will be destroyed and Moscow will have to take responsibility for its crimes,” said the presidential chief of staff, Andriy Yermak. For its part, Russia responded that it will not accept the price limit and warned that it is analyzing how to react to a measure aimed at limiting a key source of financing for its war in Ukraine.
A broad coalition of Western countries agreed on Friday to limit the price of Russian seaborne oil to $60 a barrel. Russia assures that it will continue to find buyers for its oil and at the same time has said several times that it will not supply oil to countries that implement the cap. This position was reaffirmed by Mikhail Ulyanov, Russian ambassador to international organizations in Vienna: “Starting this year, Europe will live without Russian oil”.
Once again, Moscow hopes to convince anyone that measures to damage the Russian economy will have deleterious effects on everyone: “Steps like these will inevitably result in greater uncertainty and impose higher costs on consumers of raw materials.” “Regardless of current dalliances with this dangerous and illegitimate instrument, we are confident that Russian oil will continue to be in demand.”
The rest of the members of the G-7 and Australia have joined the European top. But neither China nor India, although it will also indirectly affect Russian business with these two partners. why? Because in many cases the ships (and also the insurers) that make these supplies possible have their port, base or headquarters in countries that do apply the punishment.
According to the ‘Financial Times’, Russia is creating a “shadow fleet” of old oil tankers to export crude after the introduction of a price cap. That is why it has bought more than 100 ships equipped to transport oil since the beginning of 2022. They are vessels that are 12 or even 15 years old, acquired – discreetly – to circumvent the sanctions.
DAMAGE WITHOUT CONVULSIONING
The measures for the energy ‘containment’ of Russia are delicate in a situation of war, inflation and energy crisis that requires audacity but also balance. It is intended that Russia will earn less money, but without causing an earthquake that sends up fuel prices in general. And, if possible, to ensure that there is less Russian oil on the world market, which today is a necessary and toxic asset at the same time.
The countries for which Russia is an existential threat – first of all Ukraine, but also Poland or the Baltics – have always opted for a tougher and more risky approach. Zelensky’s chief of staff believes that the ceiling on the price of Russian oil should be lowered to $30 a barrel. From within the EU, Poland and the Baltics managed to get it to at least go down from an initial 70 to the current 60, and also to have it periodically reviewed to ensure that it is an effective and not symbolic ceiling.
The Russian barrel is around 67 dollars now, so the cap will already affect their income. And it rains, it pours: Russia has been selling oil for months at a price that is around 50% of Brent. It has been the way to attract new customers in the face of the European rudeness.
Currently, Russia is compensating for the drop in sales volume with rising prices. But their situation may get worse now and even worse in February, when the EU embargo on maritime supplies of oil products from Russia comes into force.
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George is Digismak’s reported cum editor with 13 years of experience in Journalism