“In order to protect national interests”: Putin signed a decree on retaliatory measures to the oil price ceiling imposed by the West

On Tuesday, December 27, President Vladimir Putin signed a decree on the application of special measures in response to the ceiling on prices for Russian oil and oil products previously introduced by Western countries.

The corresponding document was published on the official website of the Kremlin.

As follows from the decree, Moscow will stop supplying energy to those buyers who join the price restrictions.

This decision was made "in connection with the unfriendly and contrary to international law actions" of the United States and the states that joined them, as well as "in order to protect the national interests of the Russian Federation."

“Supplies of Russian oil and oil products to foreign legal entities and individuals are prohibited, provided that the contracts for these supplies directly or indirectly provide for the use of a price cap mechanism.

The established ban applies at all stages of deliveries to the final buyer,” the decree says.

Restrictions on oil exports will come into force from February 1 and will be valid until July 1, 2023.

In turn, the date of the introduction of a ban on the supply of petroleum products will have to be determined by the government.

Recall that back in the spring of 2022, the United States and some other Western states began to refuse to purchase oil from Moscow, and on December 5, the European Union also introduced a partial embargo on the import of Russian raw materials.

On the same day, the G7 countries (USA, Canada, France, Germany, Italy, Japan, Great Britain), the EU and Australia banned their companies from insuring and transporting oil from Russia by sea to other regions of the world at a price higher than $60 per barrel.

From February 5, 2023, the same restrictions should apply to petroleum products.

The ban on the import of Russian hydrocarbons in the West was explained by the desire to reduce energy dependence on the Russian Federation and put pressure on Moscow in connection with the events in Ukraine.

In turn, the establishment of a marginal cost of oil is expected to limit Russia's excess profits from the sale of raw materials and help stabilize the situation with prices on the world energy market.

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Earlier, Moscow repeatedly emphasized that they would cut off oil supplies to those who would support the price ceiling mechanism.

As Vladimir Putin explained, attempts to limit the cost of raw materials will not lead to anything good for the authors of such initiatives.

Against this background, the head of state urged the West to change their minds.

“Absolutely stupid decision ... those who impose something on us are not in the position today to dictate their will to us,” Putin emphasized.

There is currently no free capacity in the world to replace Russian oil.

In recent years, developed countries have actively promoted the transition to renewable energy sources and stopped investing in new projects for the extraction of raw materials, as the Russian leader also pointed out.

“And now they are also trying to establish a price ceiling in an administrative manner.

This is the road towards the destruction of world energy.

There may come a time when the underinvested industry will no longer provide the market with the required volume of products, and then prices will skyrocket and hurt those who are trying to introduce these tools, ”Putin stated on December 22.

Price chaos

Moreover, in recent months, Russia has largely reoriented its exports.

Anatoly Aksakov, head of the State Duma committee on the financial market, told RT about this.

According to him, against the backdrop of the actions of the West, Moscow increased the supply of hydrocarbons to China, India and other countries of the Asia-Pacific region, as well as to Africa and Latin America.

Meanwhile, due to the loss of the European market, Russian companies are forced to provide significant discounts on their raw materials.

So, today a barrel of Russian Urals oil is sold at an average of $57.49, while raw materials of the reference Brent brand are traded at $85-86 per barrel on the world market.

“As for oil, now we are losing in price ... The circle of consumers is limited, and buyers are asking for a discount,” Aksakov explained.

Moreover, according to him, Russia will still need time to fully replace buyers from Europe.

In this regard, oil production in the Russian Federation may slightly decrease in the near future, Deputy Prime Minister Alexander Novak believes.

As the deputy chairman of the Cabinet suggested, at the beginning of 2023, the production of raw materials in the country may decrease by about 5-7%, or by 500-700 thousand barrels per day.

“We believe that in the current situation, it is even possible to take the risks of reducing production, rather than be guided by the sale policy regarding the price ceiling.

Today it is $60, tomorrow it can be anything, and becoming dependent on some decisions made by unfriendly countries is unacceptable for us,” Novak said in an interview with Russia 24 TV channel.

However, a certain reduction in oil exports and production will not lead to significant losses for Russia.

Igor Yushkov, a leading analyst at the National Energy Security Fund, shared this opinion with RT.

“We will not suffer, since all the falling volumes of oil can then be safely attached to the same China.

At the same time, it is extremely important for us to take retaliatory measures, otherwise other countries will think that we have agreed with the price restrictions of the West,” Yushkov said.

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Moreover, according to the expert, the decline in oil exports from Russia in the near future may lead to an aggravation of the global oil shortage.

As a result, energy prices, including those of the Russian variety, may rise significantly.

For example, earlier Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev did not rule out that in 2023 the cost of raw materials in the world could increase to $150 per barrel.

“It is simply amazing how humanity likes to constantly step on the same rake, trying to regulate prices for the sake of political conjuncture.

These attempts always end with the disappearance of the product or the rise in prices for it.

After all, nobody canceled the law of value.

So it will be with oil.

Of course, it will not disappear, but the unimaginable will happen to prices, ”Medvedev wrote in his Telegram channel.

A similar point of view in a conversation with RT was expressed by Andrey Loboda, an economist and director of communications at BitRiver.

According to him, the European Union did not have time to get out of the energy crisis, and the oil price ceiling and Russia's response could push the EU into recession.

“During the usual quiet time, Europe was perfectly fueled by inexpensive Russian energy resources.

Now it will be cold and expensive.

At the beginning of 2023, oil can easily accelerate to $100 per barrel, and this is not the limit.

Deindustrialization and a reduction in the share of energy-intensive industries is the future of the EU.

Russia's revenues from oil trade, of course, may sink, but this will not be critical, given the diversification of supplies and comfortable prices for raw materials, ”concluded Loboda.