The closer the entry into force of sanctions against Russian oil, the more actively they discuss the idea of introducing a ceiling price for it
It is expected that on September 2, the G7 finance ministers during a virtual meeting will approve the application of this measure and commit themselves to complete its implementation. Western financial officials expect to develop an effective policy by December.
This is despite the fact that the market is already bearish as the Chinese economy weakens due to coronavirus restrictions in place in the country, while the eurozone is facing a recession as a result of the energy crisis. Black gold is trading below $100 per barrel, but with all this despondency, Russia still manages to make money on the sale of oil and petroleum products, no matter how it pisses off the Anglo-Saxons.
And now the Western press – CNN, The Economist, The Spectator, and many others – began to write that the Russian economy turned out to be much more stable than world economists and politicians predicted. And it is the oil and gas sector that gives it stability. Despite the decline in supplies to Europe, Russia’s revenues from the sale of energy resources to this region have doubled, and new sales markets in Asia have kept the total volume of exports at the same level.
In the first six months of this year, the Russian budget managed to receive 3.3 trillion rubles of additional oil and gas revenues, more than in all of 2021. In general, oil and gas revenues over the past six months amounted to more than 6.37 trillion rubles, which exceeds the amount of funds received by the budget from the industry for the whole of 2020 and more than 70% of the volume of 2021. At the same time, in Russia, even despite the seasonal growth in demand, there was a surplus of fuel in the domestic market. And this despite the fact that since the beginning of the year, gasoline has become cheaper.
As economist Liam Peach, who was quoted by Bloomberg, rightly pointed out, Russia can stop gas supplies to Europe for at least a year and this will not harm the country’s economy in any way. According to the expert, “as long as oil prices and export levels remain at current high levels, Russia’s current account surplus will be enough to support it even when disconnected from the main gas market.”
This is what does not give rest to anyone either in Europe or overseas. That is why the idea was born to set a price ceiling for Russian oil. However, while the idea does not find support among importers and has not gained at least some shape. Immediately after the June G7 summit, the American leader and his office began marching around the planet in search of allies ready to support the idea of imposing a ceiling on Russian oil prices, but so far the negotiations have not been successful.
Neither China, nor India, nor Singapore and Indonesia, where Assistant Secretary of the Treasury Elizabeth Rosenberg visited in August, gave an affirmative answer to requests to join this “oil flash mob”. As Indonesian Ambassador to Russia Jose Tavares said, commenting on the US initiative to limit the price of oil from Russia, Indonesia “will never support initiatives that do not meet its own national interests.”
Nevertheless, overseas they believe that negotiations on the ceiling of prices for Russian oil are progressing significantly. At least that’s what US Treasury Secretary Janet Yellen said. But so far, all that is known on this subject is that following the results of the G7 summit held in Germany, an agreement was reached to explore the possibility of limiting the price of Russian oil by banning the provision of services for its transportation by sea if its cost exceeds the ceiling agreed by international partners. The level of $40-60 per barrel was repeatedly called.
It is supposed to link financial services (insurance and oil delivery) to the price ceiling so that the shipper or importer can receive them only if the price of oil is equal to or below the established level.
On the one hand, if the G7 countries start issuing, for example, ship insurance licenses, it cannot be argued that Russian oil will not find workarounds. The market remembers the history of the Latvian mixture (or the Singaporean one).
In addition, back in June it became known that a structure owned by the Central Bank would become the new reinsurer of tankers with Russian oil. The functions of the majority of foreign companies involved in this before will be taken over by the Russian National Reinsurance Company (RNRC), whose shares are owned by the Central Bank. In addition, a significant share of maritime exports to the East is insured by Asian insurance companies on the basis of sovereign guarantees of the countries participating in the deal. And in general, many Russian companies have already created trading divisions in the Asia-Pacific region.
Even if we imagine that China will no longer be able to buy Russian oil (and, as Deputy Prime Minister Alexander Novak said, if the price is below the cost of production, Russia will simply stop exporting), this will lead to serious competition for free volumes, which, naturally, will cause prices to rise.
And, as already mentioned, there is no free capacity on the market. The West was warned about this by the late former head of OPEC, Mohammed Barkindo. Even if we imagine that one way or another, oil prices can still be artificially lowered, this will again lead to underfunding of the industry and another crisis, from which OPEC +, together with Russia, has been leading the global oil and gas market over the past few years. By the way, our overseas partners were again to blame for this crisis.
Therefore, today it is clear that neither producers of black gold, nor importers are ready to put up with such non-market decisions of the US administration, which lead only to the next development of the global energy crisis. But let’s be patient and see what the “greatest” minds of the modern non-market oil market will reveal to the world today.
Irina Kezik, Izvestia newspaper
Macron calls for continuation of dialogue with Russia
Due to censorship and blocking of all media and alternative views, stay tuned to our Telegram channel