National Oil Standard
Russian ministries, along with domestic oil producers and the Central Bank, are planning to launch trading on a national oil benchmark in October next year. A document in Bloomberg’s possession outlines the plan to attract foreign partners to buy reference oil between March and July 2023 to ensure sufficient trade volume and price oversight.
For more than a decade, Russia has pursued its own benchmark, but limited trade volumes have kept it from becoming a widely accepted standard. The push gained urgency after the Ukraine conflict triggered new Western sanctions on oil flows. Earlier this year, the G7 nations agreed to urgently explore ways to curb Moscow’s oil revenues by setting a price ceiling.
Traditionally, the Urals grade serves as Russia’s main export crude and is often priced as a discount to Brent crude from the North Sea. Since the start of the military operation, this discount widened, reducing the Urals’ appeal and prompting renewed discussion about an independent benchmark.
Bloomberg reported that two Russian officials, who preferred to remain unnamed, confirmed ongoing efforts toward a national benchmark for oil. They stated that Moscow aims to secure the ability to sell its oil without external pressure or restrictions.
One official noted that the G7 proposal underscores the need for Russia to have its own independent reference oil. An executive at a leading Russian oil company, also speaking on condition of anonymity, said negotiations with domestic producers are continuing. The article described the plan as still in an early stage, with government officials yet to decide whether additional legal frameworks are necessary for trading reference oil.
The “ceiling” on Russian oil prices
Reports from July indicate that the United States and allied partners are examining a price cap on Russian oil in the range of 40 to 60 dollars per barrel. The G7 discussed options to limit fuel costs from Russia at their late June summit.
Sources quoted in the piece say that senior White House aides, including discussions with President Joe Biden, are pursuing multiple weekly meetings to push the price ceiling forward.
One obstacle cited is the need for the European Union to lift some sanctions that were put in place earlier in June. Without such steps, the United States fears a sharp rise in fuel costs by year end, with estimates reaching near 185 dollars per barrel in some scenarios.
Even with some countries opting not to supply oil, Russia continues to earn sizable revenue from its exports, with daily receipts surpassing 600 million dollars. The country has shifted more sales toward other markets, expanding its export reach beyond traditional partners.
Russian Foreign Ministry spokeswoman Maria Zakharova warned on July 14 that plans to impose a price ceiling could push oil prices higher. She described the measures as adventurous and anti-market in nature, suggesting they could backfire and reduce market efficiency, potentially raising prices globally.
Dmitry Birichevsky, head of the Economic Cooperation Department at the Russian Foreign Ministry, echoed concerns. He argued that Russia does not have to accept such proposals and warned that the energy crisis could worsen, with stock prices climbing as a result. He emphasized that Russia, like other major economies, would continue to follow market principles while supplying oil and products to willing buyers.