Putin issued the decree with countermeasures to the oil price ceiling

Russian President Vladimir Putin has signed a decree to counter the Western-imposed cap on Russian oil prices. The decree banned deliveries from February to buyers who had adhered to the restrictions. The document was released on Tuesday, the TASS news agency reported.

The supply of Russian oil and petroleum products to foreign legal entities and natural persons is prohibited, provided that the contracts for such supplies directly or indirectly provide for the use of a price capping mechanism. The prohibition applies at all stages of deliveries to the final purchaser,” the decree reads.

The document enters into force on 1 February 2023 and is valid until 1 July 2023. The ban on the supply of oil introduced by this decree will apply directly from February 1, and the ban on the supply of Russian petroleum products will apply “from the date determined by the Russian government, but not before the date of entry into force of this decree”.

The Council of Ministers is responsible for setting this date and adopting acts aimed at implementing the related ban.

While the Russian president reserves the right to make special decisions regarding the supply of oil and petroleum productswhich are prohibited by this decree, according to a separate clause.

The Energy Ministry has been tasked with regularly monitoring the implementation of the ban. The Ministry, in agreement with the Ministry of Finance, is also entitled to provide official clarifications regarding the implementation of this decree.

On December 5, an embargo on deliveries of Russian oil by sea to the EU came into effect. EU countries also agreed on a maximum regulated price of $60 a barrel for Russian oil delivered by sea. A similar decision was announced by the G-7 countries and Australia. Western countries have banned their companies from providing transportation, financial and insurance services to tankers carrying oil from Russia at a price higher than the agreed price.

Only in recent weeks have Russian officials publicly acknowledged for the first time that Western sanctions and “price caps” have caused problems for Russian oil exports. This was stated by Alexander Novak, Deputy Prime Minister and former Minister of Energy Russia has problems insuring ships used to export oil.

In mid-December, the average price of the main Russian oil grade (Ural) fell below the “ceiling” set by the Western coalition. From November 15 to December 14, 2022, the average Ural oil price was $57.49 per barrel or $419.7 per ton. The “ceiling” on Russian oil prices went into effect on December 5, 2022. Thus, the Western coalition has already achieved the expected result: Russian oil is being sold $2.51 below the established threshold.

The price cap will only raise the price of oil, Russia warns

The measure would not affect Moscow’s “special military operation”.