Russian President Vladimir Putin Wednesday signed an executive order banning the sale of Russian oil exports for five months to countries that implemented a fuel and energy price cap in response to the war in Ukraine. A Kremlin website said the executive order responded “to the unfriendly actions taken by the United States, other foreign states and international organizations that sided with them, to establish a price cap on Russian oil and oil products, which is in violation of international law.”
The G7 nations and Australia said on December 5 they had agreed to a $60 per barrel price cap on Russian seaborne crude oil. G7 shipping, insurance and re-insurance companies will also be prohibited from handling Russian cargoes of crude oil around the globe unless it is sold for less than the price cap.
On December 12, the European Council stated the G7 intended the price cap to “limit Russia from profiting from its war of aggression against Ukraine.” The price cap was also designed to support global energy markets and minimize economic fallout from the war. US Secretary of the Treasury Janet Yellen echoed this, stating, “The price cap will encourage the flow of discounted Russian oil onto global markets and is designed to help protect consumers and businesses from global supply disruptions.”
The G7 also encouraged other countries that import seaborne Russian crude oil products to leverage the price gap in their trade relations with Russia. Yellen explained how low- and medium-income countries could utilize the price gap, stating, “Whether these countries purchase energy inside or outside of the cap, the cap will enable them to bargain for steeper discounts on Russian oil and benefit from greater stability in global energy markets.”
The G7 and Australia’s price cap on Russian-origin crude oil and petroleum products will enter into force on 5 February 2023. Meanwhile, the five-month Russian ban runs from February 1, 2023, and will be valid until July 1, 2023. The Russian ban applies to all stages of sale of oil and related products to foreign companies and individuals complying with the G7 and Australia’s price caps.
