Kremlin Says Russia Still Working on Response to Oil Price Cap

A man walks down a street amid a snowfall, in central Kyiv, Ukraine, Wednesday. (REUTERS/Gleb Garanich)

(Reuters) – Russia is still working on how to respond to a price cap imposed by Western powers on sales of Russian oil, Kremlin spokesman Dmitry Peskov said on Wednesday.

The $60-per-barrel price cap, set by the G7 nations, the European Union and Australia, came into force on Monday as they try to limit Russia’s ability to finance its military operation in Ukraine.

Vedomosti newspaper wrote on Wednesday that Russia was considering three options, including banning oil sales to some countries and setting maximum discounts at which it would sell its crude, to counter the measure.

“Analysis of the state of affairs in this area continues after the price cap decision was adopted. Relevant work and discussions are underway,” Peskov told reporters.

Russia has said it will not sell to countries that comply with the cap.

An industry source told Reuters that Moscow has been working on a decree prohibiting Russian companies and traders from making oil deals with parties who abide by the price cap regulations.

“This is essentially a ban on any mention or reference to the price ceiling in contracts and a ban on the shipment of oil and oil products in favor of countries and companies using restrictions,” the source said.

The Russian Energy Ministry declined to comment.

Vedomosti reported, citing two unidentified sources close to the government, that one of the options is to ban sales through intermediaries, not only directly from Russia. The second option being considered would prohibit exports under contracts that include the price ceiling condition, regardless of which country is the recipient.

The third option would set maximum discounts of Russia’s Urals crude to international benchmarks for sales to be allowed, the daily reported.

Deputy Prime Minister Alexander Novak said on Tuesday that Russia’s response mechanism to the oil price cap would take effect in December. Earlier, he said that Russia may reduce oil production but not by much.

Bloomberg reported that Russia was also considering setting a price floor for its international oil sales.

Another industry source told Reuters that no approach has been agreed on how to tackle the price caps, while Russia was already selling oil at a discount to China and India.

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