The European Union, the G7, and Australia have agreed to a price cap on Russian seaborne oil.
The $60 per barrel cap, which went into force on Monday, is intended to limit Russia’s ability to fund its war in Ukraine while ensuring that it continues to supply the global market.
Moscow, on the other hand, has stated that it will not comply with the policy even if it means cutting production.
The cap comes on top of the EU’s embargo on Russian oil imports by sea, as well as equivalent agreements from the United States, Canada, Japan, and the United Kingdom.
It means that Russian oil sold at or below $60 per barrel can only be supplied to third-party countries via G7 and EU tankers, insurance companies, and credit institutions. Because the world’s primary transportation and insurance corporations are situated in G7 countries, the cap might make it difficult for Moscow to sell its oil for a higher price.
Countries who do not embrace the policy can continue to purchase Russian oil over the price cap while avoiding the use of Western services to acquire, insure, or transport it.
“We have clear signals that a number of emerging economies, particularly in Asia, will observe the principles of the cap,” a European official told AFP news agency, adding that Russia is already “under pressure” from its customers to offer discounts.
However, Russia, the world’s second-largest oil supplier, stated on Sunday that it will not accept the restriction and will not supply oil subject to it.
Deputy Prime Minister Alexander Novak said the move by the West was a gross interference that contradicted the rules of free trade and would destabilise global energy markets by triggering a shortage of supply.
“We are working on mechanisms to prohibit the use of a price cap instrument, regardless of what level is set, because such interference could further destabilise the market,” he said.
