Russian oil trading above price cap, instrument has been ineffective - deputy PM
SOCHI. Oct 3 (Interfax) - Russian oil is currently trading higher than the price cap of $60 per barrel that the G7 countries and the European Union implemented, and the instrument has been ineffective, mostly affecting only end consumers, Deputy Prime Minister Alexander Novak told reporters on the sidelines of a meeting at the Valdai Club in Sochi.
"We see today that Brent prices have risen, the discount [to Urals oil] has declined, and our products are selling at market prices above the price cap. We have already said that there is an understanding today about which instruments only worsen matters. The worst issue is that they set a precedent for using the instrument in the future against not only Russian energy resources, but also other countries, as well as against other products. I hope that everyone is convinced now that the instrument that they have contrived is simply ineffective, and end consumers suffer from it," Novak said.
Novak emphasized that Russia had previously warned that the price cap would not function and would "only make matters worse for consumers".
Novak also added that Russian companies do not supply oil within the price cap, instead adhering to the Russian presidential decree regarding not complying with the price cap.
European companies were banned from buying Russian oil from December 5, 2022. Russia is reorienting its supplies to Asian markets, mainly China and India. Furthermore, the G7 and EU countries, trying to limit Moscow's revenues from oil sales but maintain its presence on the market, banned their companies from transporting Russian oil and providing services related to its transportation, unless the raw materials are sold at the price cap set by their governments (since December 5 - $60 per barrel). Russia prohibited its companies from selling crude oil if the "ceiling" condition is stipulated in the contracts. For oil products, the price cap came into force on February 5, 2023, leaving $100 per barrel for light oil products and $45/bbl for heavy oil products.
At the same time, according to the International Energy Agency (IEA), the cost of Urals has been exceeding the parameters of the "price ceiling" since July 24, on average, amid rising world oil prices and the restructuring of logistics chains. At the end of August its price exceeded the price cap by $10 and averaged $70/bbl, and in the first week of September - $75/bbl. At the same time, supplies remained stable.
Back in August, the U.S. Treasury Department emphasized that the "price cap" remains an effective tool and still limits Russian revenues. However, in late September, Treasury Secretary Janet Yellen said that the effectiveness of the mechanism has decreased. She emphasized that the United States, together with its partners, would eventually consider additional steps that could make the current measures more effective.