Russian President Vladimir Putin signed an Executive Order on Tuesday, December 27, banning the sale of oil and oil products to foreign companies and individuals abiding by the price cap imposed by the Westrn nations.
To remind, at the beginning of December, the Group of Seven (G7) nations and Australia joined the EU in setting a $60-a-barrel cap on Russian seaborne crude oil. The move has been described as a way of cutting Russia’s financial power in the wake of its aggression against Ukraine.
The coalition said that the cap would also prevent a spike in global oil prices after an EU embargo on Russian crude takes effect on Dec. 5.
“TheExecutive Order has established that inconnection with theban imposed bytheUnited States, andother foreign countries that sided with them, onthetransport ofRussian oil andoil products andrelated services, which is applied if theprice ofRussian oil andoil products is above thelimit established bysaid foreign states (price limit mechanism), Russia bans thesale ofoil andoil products toforeign companies andindividuals if thecontracts onthese sales include theuse ofthis mechanism directly orindirectly,” the order reads.
“Theestablished ban applies toall stages ofsales up toandincluding thefinal buyer.”
The executive order enters into force onFebruary1, 2023 andwill be valid until July1, 2023.
The price cap is close to the current price of Russian oil, and is not clear whether it would actually have a financial impact on Moscow as originally intended by the Western powers. What is more, Russian oil has been sold even below $50 per barrel before the cap’s entrance into force.
The countermeasure by Putin comes on the back of a major backlog of oil tankers at the Turkish straits, as Turkey insisted on evidence that ships carrying the oil had proper insurance to comply with the EU sanctions. The logjam saw dozens of tankers stuck in the straits pending clearance from Turkey to sail into the Mediterranean.
According to Bloomberg, the sanctions from the Group of Seven caused a collapse of Russia’s seaborne crude shipments halving tanker exports in the first week after the sanctions hit. The plunge was ascribed to a shortage of tanker owners willing to carry Russia’s crude.
