Russian President spokesman Dmitry Peskov stated that Moscow will not acknowledge a fixed ceiling on oil prices.
When asked if Russia might coordinate actions with others, he replied that a decision is being prepared. He described the cap as a move that could destabilize global energy markets.
He added on November 3 that authorities are examining steps for implementing Western restrictions and that details would follow after a rapid assessment of how the process will be organized.
The price cap of $60 per barrel for sea-borne Russian oil took effect on December 5. The cap received approval from the G7 nations (United States, United Kingdom, Germany, France, Canada, Italy, and Japan), Australia, and the European Union. Hungary received an exemption from border compliance. The sanctions aim to reduce Russian oil revenue to curb funding for military operations in Ukraine. On December 5, the European Union also began an embargo on Russian oil shipped by sea. By February 5, 2023, the plan was to extend both the price ceiling and the embargo to cover all petroleum products from the Russian Federation.
Three Moscow options
Sergei Kondratiev, Deputy Head of the Economics Department at the Energy and Finance Institute, suggested in an interview that Russia has three possible responses to the oil price ceiling.
First, Kondratiev proposed formalizing a ban on fuel sales to nations supporting the cap.
“Russia could prohibit oil sales to companies from the EU, the United States, Canada, and Australia that support the price ceiling. These same nations have restricted oil purchases from Russia. The rationale is to prevent increased income for the federal budget.”
He also noted that Moscow would need to decide whether to continue supplying fuel to Japan and Bulgaria, which have publicly backed price limits.
According to Kondratiev, Japan saw oil shipments fall below the cap as the G7 countries withdrew support. Bulgaria, an EU member country, backed the cap while not fully aligning with EU sanctions.
The economist’s second option involves limiting supplies of what he calls “sensitive raw materials,” such as nuclear fuel.
“Russia could consider restricting the procurement of sensitive materials for these countries. EU members rely heavily on nuclear fuel from Russia and on certain metals essential for industrial activity”, he explained.
Additionally, Moscow could impose its own ceiling on such sensitive materials with an above-market rate.
“While the EU sets a price below market for oil, Russia could set a ceiling above market for the same nuclear fuel. A discount becomes a premium”, Kondratyev added.
From Kondratiev’s view, Moscow has room to use asymmetric sanctions that complicate the ability of the initiators of the oil price cap to operate in other energy markets.
Kremlin’s stance on the restriction
The Russian position, voiced by President Vladimir Putin and Deputy Prime Minister Aleksandr Novak, has repeatedly stated that Moscow will halt exports if they conflict with Russia’s interests. Novak stressed that Russia would reject any proposed price limit and that such restrictions interfere with market mechanisms.
On December 4, Novak announced that Moscow had devised a mechanism to block a capped price for Russian oil.
“We view this instrument as non-market and inefficient. We are working to ban the use of the instrument at any level because such interference could trigger further market destabilization”, he said.
Bloomberg reported on November 26, citing an unnamed source, that the Kremlin drafted a presidential decree prohibiting Russian firms and any intermediaries from selling oil to buyers who support price ceilings.