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4th Feb 2023

EU: 'We'll see' if Moscow actually stops selling oil over price-cap

  • The level of the $60/barrel price cap can be changed by Western states at any time (Photo: ezioman)
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The EU Commission has downplayed Russia's threat to stop selling oil to countries which adopt a Western cap on prices.

"Indeed, we've seen Russia has said that it won't accept this [the price-cap]. Well, we'll see," commission spokesman Eric Mamer said in Brussels on Monday (5 December).

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"I don't follow word-for-word every statement every day by Russian authorities. We know they're prone to making lots and lots of different comments," he added, in a poke at Russia's track record of disinformation.

He spoke 12 hours after Australia, Canada, the EU, Japan, the UK, and the US forbid their firms to ship or insure Russian oil bought for more than $60/barrel [€57], in an effort to curb its war budget.

Most EU countries also stopped buying Russian oil altogether at midnight, in a separate embargo designed for the same reason.

Moscow warned on Sunday it would cut off anybody who respected the Western oil cap.

"We will only sell oil and oil products to the countries that will work with us on market terms, even if we have to reduce output to some extent," Russian energy minister Alexander Novak said.

The price cap would "completely destabilise" world oil markets, Kremlin spokesman Dmitry Peskov also said on Monday.

"Russia and the Russian economy have the required capacity to fully meet the needs and requirements of the special military operation [invasion of Ukraine]," Peskov added.

And Moscow has quietly built up a fleet of some 100 oil tankers to help its clients bypass Western sanctions, the FT reported this weekend.

Most EU countries have also been preparing for the Russia oil-purchase embargo.

But Bulgaria and Hungary have derogations to keep buying Russian oil via pipelines, putting them at risk of any new Kremlin retaliatory measures.

The EU Commission was currently in talks with Bulgaria over Sofia's plan to extend its Russia oil-buying grace period, it noted on Monday.

Other teething problems with the new sanctions included lack of clarity on re-export of Russian oil products from EU states.

The commission defended the price-cap, with Mamer saying: "It's about making sure oil can flow to third countries, but at prices that will significantly limit Russia's revenue".

Oil prices jumped on Monday amid uncertainty on future supplies, in what Mamer described as a "very liquid market".

But it was "too early" to say if the price cap was having the intended the effect of if there were technical problems with its implementation.

"There is a possibility to review the cap at regular intervals, or in between, if necessary," he said.

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