Putin forbids the transfer of Russian oil to nations that use price controls
On Tuesday, President Vladimir Putin signed a directive that forbids the delivery of oil and oil products to countries taking part in the limit beginning on February 1 for a period of five months. This was Russia's long-awaited reaction to a Western pricing cap. In response to Moscow's "special military operation" in Ukraine, the Group of Seven major nations, the European Union, and Australia agreed this month to a $60 per barrel price restriction on Russian seaborne crude oil, effective as of December 5.
While the cap is not far below the windfall price Russia was able to sell its oil for this year, which helped Moscow counter the effects of financial sanctions, it is close to the price at which Russian oil is now traded. After Saudi Arabia, Russia is the second-largest oil exporter in the world, therefore any significant disruption in its exports would have a significant impact on the world's energy supplies.
The edict was announced as a direct response to "activities that are unfriendly and inconsistent to international law by the United Governments and foreign states and international organizations joining them" and was posted on a government portal and the Kremlin website. The decree specifically mentioned the United States and other foreign states that have implemented the price cap, stating that "delivery of Russian oil and oil products to foreign entities and individuals are banned, on the condition that in the contracts for these supplies, the use of a maximum price fixing mechanism is directly or indirectly envisaged."
The ban is in effect for all supply-chain phases up to the final consumer.
The edict issued by the Kremlin read, "This...comes into force on February 1, 2023, and is effective until July 1, 2023." Crude oil exports will be prohibited starting on February 1, but the Russian government will decide when oil products will also be prohibited; this date may be post-February 1.
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