The Russian government would not follow the cap level that the European Union (EU) and the G-7 has proposed on Russian oil prices since and would prefer to deal with buyers directly, said Russian Foreign Minister Sergei Lavrov, at a press conference on Dec. 1, reported Tass, the state news agency.
“We have no interest in what the price cap will be. We will reach direct agreements with our partners. The partners working with us will disregard these caps and will give no guarantees to those who impose such caps illegally,” Lavrov said.Members of the G-7 have agreed to impose a price cap on Russian oil in attempt to punish the country financially for its invasion of Ukraine, while still allowing enough oil onto the market, but there is no agreement yet on the cap level.
A price cap on Russian oil will mean that any country that agrees to the policy will only be permitted to purchase ship-borne Russian oil products that are sold at or below the price cap. Any maritime insurance company or shipping firm that violates the price cap would face severe sanctions.
Russia Looks to New Customers for Its Energy Exports
Lavrov said that Russia could continue to develop its relationship with nations such as Brazil, India, China, and South Africa (which together with Russia are the BRICS nations), and allies like Turkey, to counter the United States and its allies.He said that Russia is completely willing to negotiate with its friends like India, China, Turkey, and other buyers of its energy exports, regarding timing, volumes, and prices.
“Every time we negotiate with China, India, Turkey and other big buyers of ours, there is an element of balancing interests in terms of time, volume, and prices,” said Lavrov.
The foreign minister then warned other states about the need to move away from Western-dominated financial institutions.
“This is certainly an interesting development of events, which, among other things, sends a very powerful long-term signal to all states without exception … to consider abandoning the mechanisms imposed by the West within its globalization systems,” Lavrov stated.
“However, decisions need to be mutual, between the producer and the buyer, rather than made by a guy wishing to punish someone.”
“This is not about earning a bit more from selling our oil. It’s just that we need to start building a system independent from these neo-colonial methods. This is what we are doing together with BRICS colleagues and about a dozen other countries that wish to coordinate their efforts with BRICS,” he said.
“We are doing so in the SCO and, clearly, in the EAEU, alongside bilateral relations with China, Iran, India, and other countries,” Lavrov continued, in reference to Russia’s war in Ukraine and its relations with its neighbors. (SCO is the Shanghai Cooperation Organization, and EAEU is the Eurasian Economic Union.)
Western sanctions on Russia have generally had little serious effect on Moscow’s revenues, which was able to benefit from higher prices, despite falling oil export volumes.
Russia became India’s top oil supplier in October, with Russian imports rising to 22 percent from just 0.2 percent in March of this year.
China’s Russian energy purchases more than doubled compared with a year ago, to $10.2 billion in October, as Moscow offered Chinese importers generous discounts on its exports.
Moscow Threatens to Penalize Any Country Supporting Price Caps
The foreign minister restated the Kremlin’s position that Russian energy companies would not supply oil to any country that favored such a price cap.Russia “will not be supplying oil to the countries who would follow the lead of dictators,” Lavrov declared.
Russian Deputy Prime Minister Alexander Novak also stated that Russia will not supply oil to countries under the price cap rules, even if the limits made it more profitable for the Kremlin.
“We have repeatedly said that such measures—the so-called cap on Russian oil price—are not just a non-market mechanism—this is an anti-market measure that destroys supply chains and can significantly complicate the situation on global energy markets,” said Maria Zakharova, a spokeswoman for Russian foreign ministry.
The White House Promotes Price Cap as Alternative to an EU Ban on Russian Oil
A far harsher, separate EU embargo on Russian crude traveling by sea or via pipeline is set to take effect on Dec. 5, in an attempt to financially curtail Moscow’s war effort.American negotiators worry that the EU embargo, combined with the threat of cutting off insurance and other services for vessels shipping Russian oil, will send crude prices upward, unintentionally boosting the Kremlin’s revenue.
The White House hopes that the price cap will encourage the EU to relax its draconian plan to completely ban the importation, financing, and insuring of Russian oil shipments.
Last week, the European Commission (EC) recommended capping Russian oil prices at $65–70 per barrel, but Poland and the Baltic countries opposed those levels.
Greece, Cyprus, and Malta, which were are reliant on tanker traffic, wanted a higher cap or some form of subsidy to compensate for the loss.
Almost all EU members have agreed to the new cap level, save Poland, which has asked for more time to consider and that a decision would not come before Friday. Poland has pressed for the price cap to be set far below the level at which Russian oil exports are currently being sold.
Meanwhile, the Biden administration, oil traders, and investors have pressed for a higher cap that would still allow Russia to sell its oil at the capped price.
U.S. Deputy Treasury Secretary Wally Adeyemo told Reuters that the Biden administration supported reviewing the price every two months.
“The key thing to remember is we’re starting at $60, but we have the ability to move the price cap, to further use the price cap to constrain Russia’s revenues over time,” Adeyemo said.
As of Dec. 1, Russian Ural crude stood $58.38 a barrel, well below the Brent crude international benchmark, which is at $86.88 a barrel.Any price cap would set Russian crude prices well below the international benchmark.
