Vladimir Putin signed a law prohibiting the sale of oil to countries and legal entities whose contracts provide for a cap on the price of Russian oil . He gave such a response to anti-Russian sanctions, in fact, having made a voluntary embargo.
The countries that announced the price ceiling for Russian oil, they announced the embargo of Russia. In the spring, the United States banned the purchase of not only oil, but also its oil products. UK too. Political scientist Taras Zagorodniy told Channel 24 about this.
Putin's restrictions are meaningless
According to According to him, the European Union declared an embargo on the supply of oil in general and introduced it from December 5.
They don't buy oil from Russia anyway. Therefore, for whom Putin introduced this restriction, it is not clear, he believes.
The political scientist noted that the EU will refuse to buy oil products from the aggressor country in the first quarter of next year.
“Therefore, Putin could sign this law or not, he did not decide anything. Moreover, he created himself another trap,” Zagorodniy emphasized.
Buyers will demand discounts
In his opinion, China and India, the theoretical buyers of Russian oil, will understand a simple thing. If Russia additionally restricts itself in deliveries to those countries that have set a ceiling on the price, it means that it has excess oil reserves that it will not be able to sell anyway. Then they will demand a discount.
Moreover, now they are demanding discounts not from $80 or $90, Brent had such a price back in the spring, but from $60. – the political scientist emphasized.
He believes that now Russia will be forced to trade oil close to the cost price. And the cost of Russian oil is relatively high.
“For example, in the countries of the Middle East, oil deposits are not deep in the ground. It is not so difficult to extract it, it can be quickly reloaded onto tankers and shipped around the world,” he explained.
According to him, in Russia oil and gas are produced in hard-to-reach regions. Then it is delivered to the ports. This means that their cost is about 30 – 35 dollars.
Putin's senseless response to anti-Russian sanctions: watch the video
Desperation of Russian oilmen
“According to various sources, the quotations of this oil, which other buyers, in particular China, are ready to buy, are now about 43-45 dollars. In fact, they are trading on the verge of a minimum profitability,” Zagorodniy said.
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He noted that with this law, Putin gave China and India the opportunity to demand a big discount.
They understand the impasse of Russian oilmen who are forced to trade on the verge of profitability – the political scientist noted.
He suggested that Russia would be forced to reduce the tax burden on oil companies so that they could produce at all. Or reduce the export duty, which is in Russia, and this will strike a blow to its own budget.
“This will need to be done so that oil companies have at least some interest in continuing to operate those wells that already exist they have,” explained Taras Zagorodniy.
What is happening with the Russian economy: important
- According to forecasts published by Investing News Network , Russian gas production will decline in 2023, and prices will be about 7% lower than this year.
- Revenues in Russia are declining. This is not least influenced by oil, the sanctions imposed on it, the embargo on its purchase and the price ceiling.
- It seems that sanctions against Russia, which are associated with oil, are gaining new momentum. Moreover, the Kremlin could lose a key market. We are talking about Asia.
