Price cap on Russian oil: Russia announces ‘mechanisms’ to avoid compliance, Hungary backs out of EU agreement
Deputy Prime Minister of Russia Alexander Novak said that Russian authorities are developing measures for refusing to supply countries that have adopted a price cap on Russian oil, reports Interfax.
“We consider [price caps] a non-market-based tool, ineffective, which will interfere grossly with market instruments, and which contradicts all rules, including those set by the WTO, for example. In our practice, we are not planning to use tools related to the price cap. To do this, we’re developing mechanisms to ban the use of price caps, regardless of what level prices are set at,” he said on air on Russia 24.
The Deputy Prime Minister added that Russia would sell oil and related products to countries that will work on market conditions “even if we have to cut production a bit.”
Earlier on December 4, Peter Szijjarto, the Hungarian foreign minister, announced that Hungary was exempted from obligations to comply with the price cap during European Union negotiations.
“During negotiations on the price cap on oil, we fought hard for Hungary’s interests, and in the end we succeeded: Hungary was exempted from limiting the price of oil,” he wrote on social media.
The Foreign Minister noted that Hungarian authorities were acting to secure the country’s energy supply. In his opinion, price caps on Russian oil “harm the European economy most of all.”
The European Union, G7 countries, and Australia agreed to cap the price of seaborne Russian oil at $60 USD a barrel. The sanctions will come into effect on Monday, December 5, after which the price ceiling will be regularly reviewed.
In late November, Bloomberg reported that Russian authorities were preparing a presidential decree banning Russian companies and traders who buy Russian oil from selling to any countries participating in the price cap.
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On the evening of December 4, the Official Journal of the European Union released a document outlining the terms of the price cap on Russian oil, which will take effect on December 5. In addition to capping the price of Russian oil, the regulations prohibit providing technical assistance to tankers carrying oil priced higher than $60 USD per barrel. Transporting oil through Russia is allowed if the oil does not belong to Russian citizens or companies.
The Financial Times reports that Russia has bought more than 100 oil tankers since early 2022. The “shadow fleet” will evidently be used to supply Russian oil to India, China, and other Asian countries.