In fulfillment of his promise to take the sanctions back to the promulgators or and supporters anytime soon, the Russian leader, President Vladmir Putin has banned the supply of Russian oil to countries observing the price cap.
World Street Journal [WSJ] said last night that Putin has ordered deliveries to those nations only on the basis of a special permission from the Kremlin leader. According to the decree, the retaliatory measures are scheduled to come into effect Feb. 1 and last through July 1, 2023.
The report said Russia’s new decisions are in response to what the decree described as unfriendly actions of the U.S., foreign states and international organizations that contradict international law.
Putin said the new promulgations are designed “to protect the national interests of the Russian Federation.”
The European Union and the U.K. earlier this month banned the import of seaborne Russian crude, while the Group of Seven nations put a ceiling on other sales by barring Western companies from insuring, financing or shipping Russian crude at above $60 a barrel.
The implications of Russia’s new decree is that the country will not sell below $60, and has additionally banned the sale outright to all countries that engaged in price cap and other sanctions.
While the price cap has not seen a major impact on pricing so far, that will likely change soon: Urals oil is trading with a generous discount to spot Brent, and was last seen around $50.
In other words, those nations buying Urals – mostly China and India – are not violating the G-7 pact… yet. However, once Urals follows Brent higher, and its price rises above $60/barrel that will change, and at that point it will be interesting to see how the G7 responds to the two fastest growing economies and two most populous nations openly defying the G7’s Russian oil price floor.
The news, which was largely as expected, has not had an impact on the price of oil with WTI and Brent both trading at three week highs following news that China was ending zero-covid policies and reopening its economy.