The expert assessed three possible options for Russia’s response to the oil price ceiling

Three options for responding to oil sanctions, which, according to the Vedomosti newspaper, were developed by Moscow, are not mutually exclusive and can be used either separately or in combination, said Igor Yushkov, a leading analyst at the National Energy Security Fund, an expert at the Financial University under the Government of the Russian Federation. He told Izvestia about this on December 7.

According to him, the scenarios under consideration have their pluses and minuses. At the same time, in his opinion, the Russian side should be careful about regulation and use market instruments.

“It is important to remember that we criticize the US, the European Union (EU), which came up with a price ceiling, for destroying the market, discarding market pricing, which leads to imbalance. We do not need to be like those whom we criticize, ”he said, adding that, speaking about the possible setting of a limit below which the Russian Federation will not sell, one must be careful.

As the expert emphasized, it is necessary to follow the rules of the market.

“In the first proposal (which the authorities may be considering. – Ed.) – to prohibit the sale of oil (to countries that have introduced a price ceiling. – Ed.). Here it is important to note the danger that it is proposed to track the chains and intermediaries also to start or fine under sanctions, ”the analyst clarified.

As the expert noted, the intermediary may not know where this oil will go next. In addition, he recalled that the countries belonging to the coalition of states that spoke for the ceiling on oil prices already have bans.

“The EU countries have imposed an embargo (on the supply of Russian oil by sea. – Ed), the United States has imposed an embargo, Canada and Australia do not buy Russian oil, Japan seems to have allowed itself to purchase at market prices only oil from Sakhalin-2. That is, a ban has already been introduced on the other side of the chain, and the entire chain will be fined if they purposefully try to shove Russian oil into the European market,” he said.

At the same time, in his opinion, the Russian side should, on the contrary, sell energy resources to anyone who wants to buy oil at market prices, and restrictions should not be introduced.

“The second proposal is to introduce a legislative ban on prescribing in the pricing formula, in contracts, binding to a price ceiling. Yes, it is quite possible to do so. I think that this, at least, will not cause any harm, ”Yushkov believes.

In his opinion, it would be possible to prescribe in contracts, for example, that there should be a link to the type of oil. But the main thing is that it should be a market pricing mechanism, but not tied to a cost ceiling.

Speaking about the third option (the introduction of a maximum discount for the sale of Urals to Brent), the expert specified that this should also be treated with caution.

“The practice of 2022 shows that yes, our discount increased to $35 per barrel, but then decreased,” he recalled.

The analyst noted that despite the fact that the market is restructuring, you can see how companies are coping with it, and discounts are decreasing.

“I think that here, in contrast to the decisions of the West, when they use non-market instruments, we must use exclusively market ones. Therefore, you need to be careful about this regulation. Do not intimidate anyone, but rather attract buyers of our oil as much as possible, ”concluded Yushkov.

As early as September 2, the heads of finance ministries of the G7 countries agreed to impose a ceiling on oil prices from Russia. On December 5, an embargo on Russian oil supplied by sea to the EU came into force. Also, the EU states agreed on an adjustable price ceiling for energy resources from the Russian Federation, transported by sea, at $60 per barrel. On December 4, Deputy Prime Minister of the Russian Federation Alexander Novak said that Moscow intends to develop a mechanism to prohibit trade with countries that have introduced a ceiling on prices for Russian oil.

On December 7, Vedomosti, citing sources, wrote that the Russian side had developed three options for retaliatory measures. Kremlin spokesman Dmitry Peskov said that Russia continues to analyze the situation and the state of affairs on this issue.

Western countries decided to reduce their dependence on Russian energy carriers against the backdrop of a special operation to protect the Donbass, the beginning of which Russian President Vladimir Putin announced on February 24.

For more up-to-date videos and details about the situation in Donbass, watch the Izvestia TV channel.


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