Oil price cap responses under debate in Moscow

Moscow is weighing a response to the price cap on Russian oil set by the G7 and the European Union. The discussions center on three potential courses of action, as reported by Vedomosti citing anonymous sources. The draft presidential decree is under consideration within the government and the president’s administration as part of the ongoing policy review.

The first option envisions a total ban on selling oil to any country that participates in or benefits from the price ceiling. This would apply even if the buyer is not directly from the restrictive bloc but instead engages in intermediaries or extended supply chains. The practical effect would be to block fuel deliveries to final buyers in G7 member countries if they are part of the end user chain. The second option would prohibit exports under contracts that include a price cap clause, regardless of the buyer’s nationality. In this scenario, any agreement pricing oil over the ceiling would be blocked at the export stage. The third scenario targets the pricing mechanism itself: it would set a maximum discount for the Urals blend relative to the Brent benchmark. If exporters attempt to widen the discount beyond the specified limit, sales would be halted.

Dmitry Peskov, the press secretary for the Russian president, commented on these media reports. He said that multiple responses are being evaluated and that a final decision will be announced publicly once the deliberations conclude. A source from Vedomosti indicated that the government would discuss Moscow’s reply to Western restrictions at a Tuesday meeting attended by the president and oil industry representatives. While none of the options has been confirmed, additional proposals may emerge during that discussion. Another insider suggested the third option is unlikely to be adopted in practice.

Analysts quoted by Vedomosti noted that the first two options would not bring new elements to the policy debate. An investment broker, Evgeny Mironyuk of BCS World of Investments, argued that these steps would simply formalize Moscow’s past statements that Russian oil would not be exported to countries that enforce the price ceiling, marking more of a political stance than a strategic shift. Mironyuk cautioned that the third option would introduce a non market mechanism into the pricing conversation with friendly importing nations, and warned that establishing any fixed discount by formula could trigger disputes that reduce export volumes.

Sovcombank chief analyst Mikhail Vasilyev is more inclined to see the latter option as the most plausible response. He argues it preserves Russia’s access to global markets while offering flexibility to adjust shipments. Vasilyev emphasized that both consumers and producers benefit from stable supply chains, particularly in the context of winter heating demand and ongoing global inflation. He warned that prices could rise in the short term if regional shortages appear before供应 chains re-equilibrate.

Alfa-Bank senior analyst Nikita Blokhin also views the second option as the most realistic path. He noted that key political figures including Deputy Prime Minister Alexander Novak and the president’s spokesperson have warned Western partners about such a response. Novak and Peskov have stated that Russia will pursue measures that ensure continued oil sales while adapting to the new constraints.

On December 6 Novak warned that introducing a price ceiling could push world oil prices higher. He stressed that Russia could reduce output modestly but would not abandon its commitment to selling oil to markets that demand it. Novak added that Russia is engaging with smaller trading houses and exploring new insurance schemes to facilitate shipments. He stressed that while conditions are tougher, Moscow intends to keep selling oil and to expand delivery networks, insurance tools, and inter company arrangements across regions.

Earlier, on December 4, Novak warned that Russia would limit supplies to partners that align with the price ceiling while maintaining commitments to markets that reject the Western proposal. He asserted that oil and petroleum products would continue to flow to those who buy under market terms even as some reductions in production might occur.

The government views the price cap as a non market instrument and questions its compatibility with global trade norms. In a separate assessment, Sergei Kondratiev, an economist and deputy head of the economics department at the Institute of Energy and Finance, outlined three routes to target a hypothetical sixty US dollars per barrel ceiling. The first route would formalize a ban on selling oil to companies from the European Union, the United States, Canada and Australia that support the price cap. Kondratiev recalled that these same countries have already restricted purchases of Russian oil as part of the broader sanctions regime. He also noted that Russia must decide whether to continue deliveries to Japan and Bulgaria, countries that officially supported the ceiling but with varying compliance records. He observed that suppliers to Japan faced lower price floors set by the G7 and EU, while Bulgaria, an EU member, supported the ceiling but had to separate from certain sanctions.

A second scenario from Kondratiev involves restricting the supply of sensitive materials and components, such as nuclear fuel, to complicate the EU, US, Canada and Australia access to other energy markets. The third option suggests imposing a price ceiling on the supply of related raw materials above market levels. Since December 5, the cap of sixty dollars per barrel has been in place, affecting Russia’s revenue and export strategy. The measure involves the G7, the EU and Australia with some exceptions for Hungary, Bulgaria, Slovakia, the Czech Republic and Croatia. Moscow has redirected shipments toward other markets, with China and India emerging as major destinations.

Western partners reserve the right to adjust the price ceiling as the situation evolves, with planned bi monthly reviews to refine the architecture of the cap. The policy aims to shield Western economies from rising energy costs while maintaining pressure on Russia’s petroleum exports. These notes reflect the ongoing strategic debate within Moscow about how best to balance revenue, market access and international diplomatic signaling in a rapidly shifting sanctions landscape. Attribution: information compiled from Vedomosti and industry commentary.