Russia said on Saturday it would continue to find buyers for its oil, despite what it said was a “dangerous” attempt by Western governments to introduce a price cap on its crude exports.
A coalition of Western countries led by the G7 group agreed on Friday to cap the price of Russian seaborne oil at $60 a barrel, as they aim to limit Moscow’s revenues and curb its ability to finance its invasion of Ukraine.
Urals crude, the most common export grade from Russia, was trading at around $67 a barrel on Friday, a steep discount from the Brent crude benchmark of around $85.
Russian President Vladimir Putin and senior Kremlin officials have repeatedly said that they will not supply oil to countries that implement the price cap.
In comments published on Telegram, the Russian embassy in the United States criticised what it said was the “reshaping” of free-market principles and reiterated that its oil would continue to be in demand despite the measures.
“Steps like these will inevitably result in increasing uncertainty and imposing higher costs for raw materials’ consumers,” it said.
“Regardless of the current flirtations with the dangerous and illegitimate instrument, we are confident that Russian oil will continue to be in demand.”
Western allies don’t want Russia to stop selling oil, its main export. Doing so would put a big dent in global supply and drive prices up at a time of soaring global inflation. It would also affect countries such as India and Turkey — key buyers of Russian crude — whose support the West is hoping to use to maintain pressure on Moscow.
But the rules will prohibit shipping, insurance and reinsurance companies — most of them headquartered in Europe — from handling cargoes of Russian crude unless it is sold for less than the price cap. That is where the real deterrent effect resides.
Currently, Russia is on track to earn more this year from oil sales than it did in 2021, buoyed by a surge in the global price after the war began, despite often selling to China and India at discounts.
The $60-per-barrel capped price is a disappointment for some European countries, including more vigorously pro-Ukraine nations such as Poland, that wanted to see the Kremlin lose much more revenue from its oil sales.
With Russia’s oil production costs estimated around $20 per barrel — and Urals crude having traded at between $60 and $100 per barrel in the past three years — the agreed price still allows Moscow to reap substantial profits.
But US officials argued that it would be better to set a price high enough that Russia would comply with it by continuing to ship much of its oil using European and American infrastructure, such as ships and insurers.
Industry officials have questioned the feasibility of the plan, which relies on each party in the supply chain of Russian oil to attest to the price of shipments. Insurers and shippers have warned that records could be falsified by Russia and trading partners intent on keeping oil flowing.