Russia has unveiled plans to monitor international crude oil prices to limit barrel discounts. The move is aimed at combating the price cap from the G7 and European Union, Bloomberg reported yesterday.
The agency said Russia’s federal budget deficit exploded in December due to restrictions on Russian oil by EU and their American allies.
According to the report, the Russian President Vladimir Putin plans to monitor international crude oil prices and use the data to better stave off any discounts for its oil that emerge on global markets.
Monitoring regulations are coming soon, and any measures meant to counteract the West’s price cap will be based on market principles, the oil ministry added.
That comes as Russia’s main oil product, Urals grade, is trading way below the G7’s $60 price cap, as the heavily sanctioned nation only has a handful of buyers to keep up its crude oil trade.
Those customers have also been able to score steeper discounts on oil as Russia struggles to replace European oil sales since an EU embargo went into effect on December 5.
Russia had sold oil below the price cap to India. Russia has already suggested creating a price floor for its crude as a counter measure, and traders have criticized the Kremlin for potentially further destabilizing the global energy market on the brink of a steep increase in demand as China unwinds from lockdowns.
Putin is said to be grappling with a massive budget deficit due to the price cap effort, and the gap reached a record 3.9 trillion rubles, equivalent to $56 billion, in December alone. The full-year deficit reached 3.3 trillion rubles.
The nation’s oil export revenue fell $15 million in the last week of 2022, and if prices for Russian oil stay at December levels, then revenues will fall by about 2.4 trillion rubles, according to Bloomberg data.
For now, Russia has labeled the price cap as “illegal” and Deputy Prime Minister Alexander Novak said in December that Moscow could cut oil production by as much as 700,000 barrels per day in response.
By Bosco Agba