Russia will ban the sale of its oil to countries using the price cap on February 1

Russia will ban from February 1 the sale of its oil to foreign countries that use the cap on the price of Russian black gold, a decision that did little to react to crude prices on the markets on Tuesday.

This ceiling price had been set at the beginning of December at 60 dollars per barrel by the EU, the G7, and Australia; and aims to deprive Moscow of significant revenue to finance its military intervention in Ukraine.

“The delivery of Russian oil and oil products to foreign legal entities and other individuals is prohibited” if they use the ceiling price, is it written in a decree signed Tuesday by Russian President Vladimir Putin.

The decree specifies that this measure is planned for a period of five months, “until July 1, 2023”.

Only “a special decision” by Vladimir Putin himself will be able to allow the delivery of Russian oil to one or more countries which have set up the price ceiling in recent weeks, it is indicated in the decree published on Tuesday.

At the beginning of December, the 27 Member States of the European Union, the G7 countries and Australia had agreed, after months of negotiations, on a cap on the price of Russian oil for export at 60 dollars. per barrel.

In fact, only oil sold by Russia at a price equal to or less than 60 dollars can continue to be delivered. Beyond this ceiling, it is forbidden for companies to provide the services allowing its maritime transport (freight, insurance, etc.).

Faced with this decision by Moscow on Tuesday, the price of black gold, already at its highest in three weeks, first climbed but the ascent was short-lived.

The price of a barrel of Brent from the North Sea for delivery in February finally ended up modestly up 0.48% to 84.33 dollars.

As for the barrel of American West Texas Intermediate (WTI), also due in February, it lost 0.03% to 79.53 dollars.

“There has been a very distinct price reaction” to the Russian announcement “but actually this move is not a surprise to the market,” Kpler commodities market analyst Matt Smith commented to Reuters. AFP.

“You would expect that, given everything the Russians have already said in the last few months and what they have done with natural gas, refusing to sell to Bulgaria and Poland because these countries were not paying not in rubles,” the analyst added.

According to him, the application of this ban will have a limited impact, because “the big buyers of Russian crude like India or China do not apply the ceiling price” and buy it below 60 dollars a barrel.

“It will tighten the offer a little, but not that much,” commented Matt Smith.

The price of a barrel of Russian oil (crude from the Urals) itself is currently hovering around $65, barely above the cap set, implying a limited short-term impact of this cap measure, according to many observers. .

Ukrainian President Volodymyr Zelensky had thus deplored “a weak position” of his Western allies at the time of his establishment.

For their part, the Russian leaders had declared on several occasions “not to accept” this mechanism which “will have no impact” on the course of the Russian offensive against its Ukrainian neighbor.

On December 9, Vladimir Putin threatened the West to “reduce production” of Russian oil “if necessary”, then castigating a “stupid decision”.

Russia is the world’s second largest oil exporter and was, in 2021, the second largest supplier of black gold to European Union countries. According to European leaders, 90% of Russian oil exports to the EU will already be stopped by the end of 2022 in protest against the Russian offensive in Ukraine.

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