Russia threatens Western countries that would support oil price cap
The very idea of capping oil prices is absurd, Novak said. According to him, attempts to interfere in market mechanisms in such an important industry will destabilize it and pose a threat to the entire oil market. This, in turn, may endanger the energy security of the whole world.
It is European and American consumers who will pay for this in the first place. They already pay high prices due to destabilizing factors that they accept, such as sanctions and restrictions,
RIA Novosti quoted Novak as saying.
According to him, Russia is not going to cooperate on non-market conditions, nor will Russia be supplying oil and petroleum products to the countries that support price caps on energy supplies from Russia, Pravda reported.
"Realizing that China and India - the main buyers, who have recently stepped up their purchases - will absolutely ignore Western ultimatums, the free and democratic G7 threatens to stop ensuring such supplies by sea," RIA Novosti said.
The paper reminded it is simply impossible to close access to international waters for Russia, not just because the country's sea and ocean coastline exceeds 30,000 kilometres, but also because Russia "has a navy", and it is one of the three pillars of the world's oil supply.
Replacing Russian oil is simply physically impossible,
the paper said, reminding that Russia produces a little over ten million barrels of oil a day, second in the world after the U.S. (11.2 million), with Saudi Arabia producing 9.3 million barrels.
Russian oil production may increase this year, Novak said, despite Western sanctions over Ukraine, while the country supports OPEC+ deal extension beyond 2022.
He said production of oil and gas condensate is expected at between 520 million tonnes and 525 million tonnes in 2022 after it reached 524 million tonnes in 2021.
Russian oil production has proved resilient and has defied predictions of a steep decline following sweeping restrictions introduced by the West after Moscow sent its troops into Ukraine on 24 February.
Oil and gas condensate fell by 11.5% in April from March to just above 10 million bpd but had been on a recovery path since then. In July, it rose to 10.76 million bpd.
"We produce exactly as much as we have the ability to produce and sell. We have a small increase, the situation is improving as you can see. If the situation continues to stabilize, and our companies will find (new) markets with confidence, I think that production will also increase," Reuters cited Novak as telling reporters.
Russia still faces more challenges on oil markets, including plans to cap prices for its oil. The European Union will also stop buying all seaborne Russian crude oil from early December and will ban all Russian refined products two months later as part of sanctions efforts.
Novak said that Russian companies are readying for the oil embargo. He also criticised the plans to cap Russian oil prices by the global leading economies.
In my opinion, this is utterly absurd. And this is an interference in the market mechanisms of such an important industry as oil.
The International Energy Agency summer report shows that the Russian revenue from oil exports increased 40% from last year, indicating that the sanctions are not cutting off revenue to Russian President Vladimir Putin and his war machine. Russia has managed to boost sales of oil to Asia, notably to China and India.
White House Press Secretary Karine Jean-Pierre told reporters on Wednesday that "this is exactly why [...] President Biden and the G7 leaders have directed relevant members of their team to explore a mechanism to set a global price cap. [...]
this would be for Russian oil and — and starving Putin of his main source of cash and forcing down the price of Russian oil to help blunt the impact of Putin’s war on the pump.
G7 Finance Ministers are meeting on Friday to talk more about this plan that the U.S. says would not only deliver and effective blow to Putin but also help lower prices.
"This is the most effective way, we believe, to fit — to hit hard at Putin’s revenue. And doing so will result in not only a drop in Putin’s oil revenue but also global energy prices as well," Jean-Pierre said.
The impact of the oil price cap on Europe is likely to be limited, as the embargo, under which the EU does not buy Russian oil, is about to come into force. The exception, which is pipeline oil (which Hungary also receives), is entering the market at a very depressed price compared to Brent.
Cover photo: Getty Images
