The price cap on Russian seaborne oil as set by the Group of Seven went into effect on Monday which is a part of the efforts of the West to reduce the ability of Moscow to finance its war in Ukraine.
However, Russia has reacted to the cap by saying that it will not comply even if it means cutting back on oil production.
The G7, the European Union, and Australia will implement the price cap, which adds on to the the EU's embargo on Russian crude imports by sea and equivalent promises made by the United States, Canada, Japan, and Britain.
It permits the shipment of Russian oil to third-party countries via G7 and EU tankers, insurance companies, and credit institutions only if the cargo is purchased at or below the price cap.
Since the majority of the world's shipping and insurance companies are based in G7 countries, therefore the cap may make it tough for Moscow to sell its oil at the market rate which is higher than the price cap.
Russia is the second-largest oil exporter opf the world and it has said on Sunday that it would reject the price cap imposed and would refuse to sell oil according to the conditions set by the G7 , even if it meant reducing output.
Since Soviet geologists discovered oil and gas in the swamps of Siberia in the decades following World War II, selling oil and gas to Europe has been one of the main sources of Russian foreign currency earnings.
Due to the delicate nature of the scenario, a source who asked not to be identified told the media that a declaration was being organized to restrict Russian enterprises and traders from communicating with countries and companies that are subject to the cap.
Essentially, such a decree would prohibit the export of oil and petroleum products to nations and companies that enforce it.
Nonetheless, with the price cap set at $60 per barrel, not far below the $67 level at which it closed on Friday, the EU and G7 countries expect Russia to continue selling oil at that price while accepting smaller profits.
The EU and the G7 will review the cap level every two months, with the first such review scheduled for mid-January.
"This review should take into account ... the effectiveness of the measure, its implementation, international adherence and alignment, the potential impact on coalition members and partners, and market developments," the European Commission said in a statement.
The crude oil cap will be followed by a similar measure affecting Russian petroleum products on February 5, though the level of that cap has not yet been determined.
(Source:www.aljazeera.com)
However, Russia has reacted to the cap by saying that it will not comply even if it means cutting back on oil production.
The G7, the European Union, and Australia will implement the price cap, which adds on to the the EU's embargo on Russian crude imports by sea and equivalent promises made by the United States, Canada, Japan, and Britain.
It permits the shipment of Russian oil to third-party countries via G7 and EU tankers, insurance companies, and credit institutions only if the cargo is purchased at or below the price cap.
Since the majority of the world's shipping and insurance companies are based in G7 countries, therefore the cap may make it tough for Moscow to sell its oil at the market rate which is higher than the price cap.
Russia is the second-largest oil exporter opf the world and it has said on Sunday that it would reject the price cap imposed and would refuse to sell oil according to the conditions set by the G7 , even if it meant reducing output.
Since Soviet geologists discovered oil and gas in the swamps of Siberia in the decades following World War II, selling oil and gas to Europe has been one of the main sources of Russian foreign currency earnings.
Due to the delicate nature of the scenario, a source who asked not to be identified told the media that a declaration was being organized to restrict Russian enterprises and traders from communicating with countries and companies that are subject to the cap.
Essentially, such a decree would prohibit the export of oil and petroleum products to nations and companies that enforce it.
Nonetheless, with the price cap set at $60 per barrel, not far below the $67 level at which it closed on Friday, the EU and G7 countries expect Russia to continue selling oil at that price while accepting smaller profits.
The EU and the G7 will review the cap level every two months, with the first such review scheduled for mid-January.
"This review should take into account ... the effectiveness of the measure, its implementation, international adherence and alignment, the potential impact on coalition members and partners, and market developments," the European Commission said in a statement.
The crude oil cap will be followed by a similar measure affecting Russian petroleum products on February 5, though the level of that cap has not yet been determined.
(Source:www.aljazeera.com)