On Saturday, Russia rejected a price cap on its oil exports proposed by the Group of Seven (G7) and Australia. The measures would prohibit Russia from selling oil at more than $60 per barrel.
A spokesperson for the Kremlin, Dmitry Peskov, informed domestic news agencies that Russia “will not accept this price cap.” Alexander Novak, Deputy Prime Minister of Russia, has doubled down on the Kremlin’s comments stating “we are working on mechanisms to prohibit the use of the price cap instrument.”
Russia is currently selling barrels of oil at around $65 a piece, a price not significantly higher than the proposed $60 price cap. The G7 has argued that the $60 price cap means Russia’s incentive to sell oil will remain; however, the nation would have received a dramatic reduction in profits.
The price cap comes after fears Russia could circumvent EU sanctions by selling oil to countries outside the European Union marketplace. The G7’s price cap would prevent Russia from selling at market prices, ensuring they are making less oil revenue while Russian President Vladimir Putin’s forces invade Ukraine.
Ukraine, a nation that has lost thousands of civilians to Putin’s war, has argued that the price cap should be even lower. Ukraine’s Presidential Chief of Staff, Andriy Yermak, stated that a cap of “$30 would have destroyed it (the Russian economy) more quickly”.
The White House has welcomed news of the G7’s price cap, viewing it as another economic instrument to help quash Putin’s regime. In recent months, nations around the world have been rallying around sanctioning the Russian Federation. Germany and Poland, two nations that are deeply reliant on Russian oil, have agreed to cut off their pipeline of oil from Russia by the end of the year.
Russia, meanwhile, has warned the world of potential global market repercussions because of the price cap. Russian Deputy Prime Minister Alexander Novak has said “such interference could further establish the market.”
Despite Russia’s objections to the oil price cap, the Group of Seven seem to be pushing full steam ahead on the implementation of the cap this coming week.