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If you are among those who accepted the oil price cap recently imposed on the Russian Federation because of its invasion of Ukraine, you no longer can buy oil from this country.
An oil platform in the sea – illustrative photo. Image credit: Pixabay, free license
Today Russia announced it is ready to ban oil sales to all countries that support the price cap policy that was agreed upon by Western countries supporting Ukraine’s fight for its freedom. The ban will come into effect starting from Feb.1, 2023.
This price cap was a long-awaited step that was needed to further restrict Russia’s resources to fund its war in Ukraine.
The oil price limitation was effectively introduced on Dec. 5. According to this principle, all oil traders must agree not to pay more than $60 per barrel of Russian seaborne oil. Those who do not support the price cap will lose their access to a range of Western financing services, such as shipping insurance.
The current price cap was set near the current price of Russian oil. This limit, however, is much lower compared to the past year, when the Russian Federation was able to trade at a very high margin of profit.
Currently, Russia remains the world’s second-largest oil exporter. This also means that oil trade accounts for a large share of its economy and any restrictions could lead to its reduced ability to fund the war in Ukraine.
Certainly, such disruptions are posed to have consequences on the global energy market. Such a measure was not applied even during the peak of the Cold War. However, most European countries have already found ways to stabilize their energy systems while completely avoiding the import of resources from Russia.
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