On Tuesday, Russian President Vladimir Putin signed a decree banning the supply of oil and related products to countries that imposed a price limit on Russian crude prices, provided that it enters into force on February 1st, 2023, and lasts for a period of five months.
The Group of Seven major countries, the European Union and Australia agreed this month to cap the price of Russian seaborne oil at $60 a barrel, as of December 5, in response to Russia’s war in Ukraine.
The Kremlin decree states that: “The ban will enter into force on February 1st 2023, and will remain in effect until July 1st 2023”.
Crude oil exports will be banned from the first of February, but the date for banning oil products will be determined by the Russian government, and it could be after the first of February.
The decree includes a provision allowing Putin to override the ban in special cases.
In response to the Russian move, the Financial Times newspaper considered oil embargo on buyers who comply with the price limit set by the Group of Seven, is weak among other options, stating that, it’s less retaliation than the tougher options that the Kremlin has been promoting in the media.
The Russian decree came in response to G7 attempts to limit gains from the country’s oil revenues, under which sales are prohibited under contracts that comply with the $60 price limit imposed by Ukraine’s Western allies.
The British newspaper said that in practice the cap hasn’t yet been applied, as Moscow sold Urals crude, Russia’s main crude oil blend, at prices below $60 a barrel.
Russia ignored the move of the Group of Seven, which is primarily aimed at securing oil shipments, and set up a so-called “shadow fleet” of ships that continue to ship its oil in response.
In turn, The Wall Street Journal reported that the global impact of the Russian decision will depend on whether the decree signed by Putin will significantly disrupt supplies in the global oil market and how Russia implements it.
Many of Russia’s crude oil exports are now sold at prices well below the $60 cap, mainly by countries such as India, China and Türkiye, which haven’t joined Western sanctions against Moscow.
If the Russian president decided to cut off oil exports to these non-Western buyers, that could have a significant impact, and if only the countries that put in place the sanctions were targeted, the impact would be muted since they have already banned most Russian imports.
