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Russia’s Vedomosti: Russian authorities considering three options in response to G7 and EU introducing Russian oil price cap

Russia’s authorities are considering three options in response to the G7 countries and the European Union introducing a price cap on Russian oil, Russian newspaper Vedomosti reports, citing sources close to the Cabinet of Ministers.

According to Vedomosti, the first option is a total ban on selling oil to countries that support the price cap, including those that buy it not directly from Russia but through intermediary countries.

The second option is to ban oil export for those contracts that stipulate a price cap. In this case, it would not be important which country is indicated as a recipient in the contract.

The third option is to introduce a maximum discount on the Urals oil in comparison to Brent crude oil. In case of an increase of the discount, sales will be banned.

According to the newspaper, the draft of a presidential decree on the matter is being discussed by his administration with the government. According to Vedomosti’s sources, none of the options have so far been approved, development of alternative scenarios or a mix of different ones has not been excluded.

Bloomberg previously reported, citing anonymous sources, that Russia could set up a price floor on oil in response to the price cap introduced by the G7 countries. Moscow is also considering either introducing a fixed price per barrel of Russian oil or “stipulating maximum discounts to international benchmarks at which they can be sold”.

Citing a source in the Russian government, Bloomberg also reported that the Kremlin was preparing a decree banning Russian companies and international traders that buy Russian oil from reselling it to anyone participating in the price cap.

Still, according to another Bloomberg source, the Kremlin does not want to antagonise “neutral states that buy its crude by putting any pressure on them through non-market steps”.

At the beginning of December, G7 (Germany, Italy, France, the UK, Canada, Japan, and the US) and Australia agreed to introduce a price cap on Russian seaborne crude oil at $60 per barrel. However, Hungary was exempted from having to follow the price cap.

“The Price Cap Coalition will ban a broad range of services—including maritime insurance and trade finance—related to the maritime transport of crude oil of Russian Federation origin (“Russian oil”) unless purchasers buy the oil at or below $60/barrel,” the statement read.

The Kremlin previously said that Russia would not trade oil with countries that impose a price cap. “Russia will not act against common sense and pay for others’ prosperity. We will not supply energy resources to countries that will cap prices for them,” Russian President Vladimir Putin said.

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