Russia’s Deputy Prime Minister Alexander Novak stated that the nation will halt the supply of oil and related petroleum products to any countries or companies that choose to impose a ceiling on Russian oil prices.
He explained that oil and its products will not be delivered to entities that enforce market restrictions, emphasizing that Moscow will not operate under non‑market conditions.
Novak described the idea of capping Russian oil as utterly ridiculous and warned that it could destabilize the global energy market, driving prices higher and hurting consumers in Europe and the United States who already face elevated energy costs. He warned that such a move could shatter the market entirely.
He noted that no OPEC+ member, nor major buyers like China and India, has shown support for a price cap on Russian oil.
Novak also criticized the language used by some critics, stating that there has been no positive response from other market players regarding the proposals being discussed.
He acknowledged that sanctions have distorted the oil futures market, pulling it away from the real market. He pointed out that not only Venezuelan and Iranian oil, but also Russian oil, have felt the impact of sanctions, and that prices often reflect these sanctions and the risks they impose on the ground.
Russia Readies for an Oil Embargo
Novak said that Russian producers are already planning with upcoming EU sanctions in mind. He referred to a December timeline when, as part of the sixth package, the ban on maritime purchases of Russian oil by EU states would begin and the purchase of petroleum products would follow in February 2023.
He added that Russian companies are aware of the December deadline and are preparing accordingly. He expressed hope that their plans account for the transition and that operations will be adjusted to maintain current output levels.
Novak asserted that Russia is producing oil at a rate that aligns with what can be extracted and sold, and that the figure is rising. The trend, he said, will continue if oil firms can find a robust market for their products.
In addition, Russian authorities have revised their oil production forecast upward. Novak noted that by year’s end Russia could produce between 520 and 525 million tons of oil, with a minor growth around 0.2 percent.
Amid Novak’s remarks, the stock prices of major Russian oil companies surged. By 6:15 p.m. Moscow time, Lukoil shares rose about 11 percent to around 4.74 thousand rubles, Bashneft gained nearly 5 percent, and Rosneft showed gains after an initial drop. By the close of trading, Lukoil stood higher by roughly 10.6 percent at around 4.72 thousand rubles.
The Price Cap Idea
G7 finance ministers planned to discuss the concept of moving to a price-based constraint on Russian oil on the date planned for September 2. The White House argued that such a cap would hinder the financial benefits Moscow has enjoyed from oil sales.
US Deputy Secretary of State Victoria Nuland warned that a total ban on Russian crude could push prices higher, potentially allowing Moscow to redirect sales to other markets like India or China. She argued that a price ceiling would prevent sales above a set level and keep Russian producers from earning excessive profits.
German Chancellor Olaf Scholz suggested that any price mechanism would need broad international consensus to be effective.
The price cap concept emerged during the G7 summit in late June. The Washington plan proposed exempting countries willing to buy at a defined price from certain sanctions on shipping and insurance. Bloomberg reported a possible cap range of $40 to $60 per barrel, which would still leave Russia with incentives to adjust production to maintain revenue. Reuters noted that the G7 aimed to set the cap by December 5, with the EU embargo proceeding thereafter.
Novak had previously suggested that setting a price ceiling could destabilize the market and lift price quotes. Analysts at JPMorgan Chase & Co. speculated that oil prices could jump to as much as $380 per barrel if sanctions compel Moscow to scale back production.
Elvira Nabiullina, President of the Central Bank of the Russian Federation, also commented on higher energy prices, stating that Moscow would prioritize supplies to nations that do not participate in the price ceiling initiative.