On Friday, September 2, the finance ministers of the G7 (USA, UK, Germany, France, Italy, Canada and Japan) announced plans to introduce a ceiling on prices for Russian oil.
This is stated in a statement published on the website of the British government.
“Today, we reaffirm our joint political intention to finalize and enforce a comprehensive ban on maritime transport services for crude oil and oil products of Russian origin around the world.
The provision of such services will be allowed only if oil and oil products are purchased at a price equal to or lower than that determined by a broad coalition of states,” the G7 said.
Restrictions on services for the transportation of oil imply a ban on insurance and financing of ships that are engaged in the transportation of raw materials.
The main goal of such restrictions is to "reduce Russia's income" from the sale of hydrocarbons, the association added.
At the same time, the initiative will provide for targeted mitigation mechanisms that will allow the most vulnerable states to maintain access to oil from the Russian Federation.
“We seek to build a broad coalition to maximize the effectiveness of our measures and call on all countries that still want to import oil and oil products from Russia to commit to doing so only at prices at or below the ceiling,” the document says.
Recall that back in early March, the United States introduced a complete ban on the import of energy resources from Russia, and the UK announced plans to stop buying oil from Moscow before the end of the year.
Later, the EU countries also decided to abandon Russian raw materials, but the embargo should be fully operational only by the beginning of December and will only apply to sea deliveries, and not to pipeline ones.
Curiously, the United States at the time of the embargo stated that it could afford to take such a step due to the country's strong energy infrastructure.
However, some time later, American consumers were faced with a rush increase in fuel prices.
A similar situation has arisen in the fuel market in the UK and the EU.
Meanwhile, Russia continued to receive a high volume of income from the sale of energy products.
Thus, a number of European states decided to stock up on Russian oil before the embargo was introduced and are now actively increasing their purchases of raw materials.
Along with this, Moscow began to redirect hydrocarbon exports to friendly countries and has already become the largest supplier to India and China.
Against this background, at the beginning of the summer, the G7 countries (USA, UK, Germany, France, Italy, Canada and Japan) thought about creating a so-called oil consumer cartel to set a price ceiling for raw materials from the Russian Federation.
At that moment, US President Joe Biden promised to provide "huge problems" with the delivery of Russian oil to customers.
“We will not work on non-market conditions”
However, Russia is not going to sell raw materials at a loss and intends to completely stop oil exports to those countries that support the G7 initiative.
This was announced on September 1 by Deputy Prime Minister Alexander Novak.
“If they impose price restrictions, then we are just for such companies or countries that will impose restrictions, we will not supply them with oil and oil products, since we will not work on non-market conditions,” Novak is quoted by TASS.
The very proposal of the "Big Seven" Deputy Chairman of the Cabinet considers "complete absurdity."
According to him, other oil producers also do not respond positively to this idea, and such large energy buyers as India and China have not yet expressed their desire to join the consumer cartel.
“(This is. -
RT
) interference in the market mechanisms of such an important industry as the oil industry, which is the most important in terms of ensuring the energy security of the whole world, such attempts will only lead to destabilization of the oil industry ... This will completely destroy the market,” Alexander Novak emphasized.
RIA News
© Pavel Bednyakov
Moreover, according to the Deputy Prime Minister, first of all, European and American consumers, for whom energy is already costing more and more, will pay for this measure.
A similar point of view was voiced by Russian President Vladimir Putin back in July.
“We hear all sorts of false ideas about limiting the volume of Russian oil, limiting the price of Russian oil.
It's the same thing that happens with gas.
The result - even surprisingly, it is said by people with higher education - will be the same: a rise in prices.
Oil prices will skyrocket,” Putin warned.
fragile ceiling
Note that commodity quotes have already reacted to the G7 statement.
In the afternoon, a barrel of Brent oil on the London ICE exchange rose in price by 4.3% to $95.28.
At the same time, if the G7 initiative is implemented and, as a result, Russia cuts off supplies, prices may increase by more than 3-4 times.
Dmitry Medvedev, deputy head of the Security Council of the Russian Federation, warned about this earlier.
“There will be significantly less oil on the market, and its price will be much higher.
Moreover, it is higher than the predicted astronomical price of $300-400,” Medvedev wrote in his Telegram channel.
According to experts interviewed by RT, in theory the G7 plan can be implemented, but in practice it will be problematic to limit the cost of Russian oil, since this requires the consent of all importers.
Thus, the further development of events will largely depend on what position other participants in the oil market will take, experts say.
“It is important to understand how, for example, Turkey and Egypt will react, through the straits and channels of which our oil flows further.
The reaction of OPEC, China and India is also important.
Given the dense tangle of interests of many countries, events can develop very unpredictably, and then the anti-Russian cartel from the G7 states may not achieve the effect they need, ”Valery Yemelyanov, an expert on the BCS World of Investments stock market, told RT.
Russian Presidential spokesman Dmitry Peskov said on Friday that Moscow will continue to supply its oil only to countries that operate on market terms.
Given Russia's growing trade ties with China and India amid Western sanctions, analysts do not expect these countries to join the G7 proposal.
“Beijing and New Delhi have not joined any of the seven packages of restrictive measures against the Russian Federation and are friendly states for us.
Therefore, we believe that they will not support the G7 plan.
It is beneficial for both states to trade with Russia, since Moscow already provides them with a large discount on the purchase of energy resources in the amount of about 30%, ”said Vladimir Chernov, an analyst at Freedom Finance Global, in a conversation with RT.
Igor Yushkov, a leading analyst at the National Energy Security Fund, expressed a similar point of view in an interview with RT.
According to him, there is no reason for India and China to refuse existing contracts with Russia, because otherwise Moscow will stop exports and countries will have to buy more expensive raw materials.
“As for the ban on insurance of ships, Russia can negotiate with major players on the condition that tankers will be insured by Russian companies under state guarantees.
Oil is already going to India on such terms,” Yushkov said.
RIA News
© Vitaliy Timkiv
According to Vladimir Chernov, Chinese and Indian companies can buy oil from Russia at a discount and later resell it to Western countries at rising average world prices.
At the same time, even under these conditions, the profit of Russian oilmen will still strive for record values due to the rise in the cost of raw materials on global platforms, the analyst is sure.
“Russia will sell its oil to other countries at world prices - perhaps at a discount - or cut production, and black gold quotes will soar to record levels.
In this case, the G7 countries themselves will suffer from high inflation and will think about lifting the price ceiling, ”the source added.
Gas limit
It is noteworthy that against the backdrop of the G7 initiative regarding Russian oil, the EU countries thought about limiting the cost of gas from the Russian Federation.
This, in particular, was announced on September 2 by the President of the European Commission, Ursula von der Leyen.
“I am firmly convinced that the time has come for Europe to introduce a price ceiling on pipeline gas from Russia,” Reuters quoted the head of the EC.
Meanwhile, in response to the words of von der Leyen, Dmitry Medvedev warned that in this case Moscow would act by analogy with oil.
As a result, according to him, "there will simply be no Russian gas in Europe."
© AFP/RIA Novosti
As suggested in a conversation with RT by Gleb Finkelstein, a specialist in the Strategic Research Department of Total Research, unlike oil, today not all EU countries are ready to abandon Russian gas.
Thus, it is practically impossible to replace the fuel supplied by Moscow, so the initiative is unlikely to receive unanimous support in the EU, the analyst believes.
“Firstly, the willingness to discuss something does not mean that this topic will be raised at all.
Secondly, it is far from certain that it will be supported at all.
Thirdly, in any case, contracts for gas supplies from Russia to European countries are long-term, so it is extremely unlikely that they will be reviewed,” Finkelstein added.
According to him, if the EU countries nevertheless decide to take such a step, then, as in the case of oil, they will have to look for alternatives to Russian gas and buy raw materials at inflated world prices.
In this regard, Moscow may suffer certain losses, but will be able to reorient supplies to other markets.
“Russia is already building Power of Siberia 2 and Pakistan Stream.
In addition, the Turkish Stream is operating at full capacity, Hungary and Serbia have requested additional volumes of gas, and China is breaking records in terms of purchases.
Yes, if Europe falls out of the pool of clients, this will affect the income of companies and the budget, but the situation will not be critical.
The budget receives 4-5 times less from gas than from oil.
In addition, this can tritely speed up the country's gasification program: gas giants will need sales in order not to burn tens of millions of cubic meters, ”the expert concluded.