On December 1st 2022, The Foreign Minister of the Russian Federation, Sergey Lavrov stated that Russia is immune and not bothered by oil price caps imposed by the G-7 countries on it. This decision has been taken by the finance ministers of the Group of Seven to reduce Russian Revenues and its ability to fund its war of aggression in Ukraine. Additionally, the organisation wishes to minimise the damaging economic fallout of the conflict on low and medium-income countries (3rd and 2nd World Nations).
The introduction of a price cap on Russian oil will mean that countries that agree to the policy will only be permitted to purchase Russian oil and petroleum products transported via sea that are sold at or below the price cap. The foreign minister remarked that it should be decided on a mutual basis between producers and consumers and “not someone who decides to punish someone”
According to the Tass News Agency, Lavrov added that “we are not interested in what the price cap will be and we will negotiate with our partners directly and the partners who continue to work with us will not look at these caps and will not give any guarantees to those who illegally introduce them.”
Lavrov’s statement mentions the three countries or partners which would help Russia in this regard. The list includes Turkey, India and China. Russia is an important oil supplier for India. It has surpassed Saudi Arabia and Iraq by a significant margin.
According to the official representative of the Russian Foreign Ministry, Maria Zakharova said that introducing a mechanism to limit Russian oil prices could greatly complicate global markets and have devastating impacts on everyone.
The so-called Price caps are nothing but a non-market mechanism. It can destroy supply chains and complicate the situation in energy markets. Russian Deputy Prime minister Alexander Novak stated earlier that Russia will not supply oil to the countries under the terms of the price caps, even if it would be more profitable for them.
Following Russia’s invasion of Ukraine in February, the price of oil soared and has remained at high levels. This allows Russia to increase its revenue despite the fall in export volumes.
The G7 consists of the UK, the US, Canada, France, Germany, Italy and Japan. The group is an organisation of the world’s seven largest “advanced” economies, which dominate global trade and the international financial system. Apart from the G-7, The 27-member strong EU (European Union) plans an embargo on Russian Crude oil from the December 5th 2022. It will applicable for crude shipped by tanker and piped supplies.