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Russia has repeatedly said it will not supply oil to countries that implement the cap – a stance reaffirmed by Mikhail Ulyanov, Moscow’s ambassador to international organizations in Vienna, in posts on social media on Saturday.
“Starting from this year Europe will live without Russian oil,” he said.
The G-7 price cap will allow non-EU countries to continue importing seaborne Russian crude oil, but it will prohibit the shipping, insurance and reinsurance companies from handling cargoes of Russian crude around the globe, unless it is sold for less than $60.
That could complicate the shipment of Russian crude priced above the cap, even to countries that are not part of the agreement.
U.S. Treasury Secretary Janet Yellen said the cap will particularly benefit low- and medium-income countries that have borne the brunt of high energy and food prices.
“With Russia’s economy already contracting and its budget increasingly stretched thin, the price cap will immediately cut into (President Vladimir) Putin’s most important source of revenue,” Yellen said in a statement.
In comments published on Telegram, the Russian Embassy in the United States criticized what it called the “dangerous” Western move and said Moscow would continue to find buyers for its oil.
“Steps like these will inevitably result in increasing uncertainty and imposing higher costs for raw materials’ consumers,” it said. “Regardless of the current flirtations with the dangerous and illegitimate instrument, we are confident that Russian oil will continue to be in demand.”
Kyiv welcomed the price cap, which is designed to make it harder for Russia to bypass EU sanctions by selling beyond the European Union at market prices.
“We always achieve our goal and the economy of Russia will be destroyed, and Russia itself will pay and be responsible for all crimes,” Ukraine’s presidential chief of staff Andriy Yermak said Saturday.
Limit funds for the ‘war machine’
Poland, which initially refused to back the price cap over concerns the $60 ceiling was too high, eventually confirmed its agreement on Friday evening.
Yermak noted a cap of “$30 would have destroyed it (the Russian economy) more quickly.”
The market price of a barrel of Russian Urals crude traded at around $67 on Friday, just slightly higher than the $60 cap, suggesting the measure may have only a limited impact in the short term.
The G-7 said it was delivering on its vow “to prevent Russia from profiting from its war of aggression against Ukraine, to support stability in global energy markets and to minimize negative economic spillovers of Russia’s war of aggression.”
The White House described the cap as “welcome news” that would help limit Russian President Vladimir Putin’s ability to fund the Kremlin’s “war machine.”
The G-7 and Australia said they were prepared to adjust the price ceiling if necessary.
Russia has earned 67 billion euros ($71 billion) from the sale of oil to the European Union since the start of the war in February.
Its annual military budget amounts to around 60 billion euros, said Phuc-Vinh Nguyen, an energy expert at the Institut Jacques-Delors in Paris.
The EU embargo on seaborne deliveries follows a decision by Germany and Poland to stop taking Russian oil via pipeline by the end of 2022.
In all, more than 90% of Russian deliveries to the European Union will be hit, according to the bloc.
‘Endure’ power cuts
On the ground, Russian forces carried out strikes in the east of Ukraine on Saturday, hitting a “civilian infrastructure facility” in the eastern city of Kramatorsk, the Ukrainian army said.
After suffering humiliating defeats during what has become the largest armed conflict in Europe since World War II, Russia began targeting Ukrainian energy infrastructure in October.
The strikes have caused sweeping blackouts and cut off water supplies and heating to civilians at a time when the temperature in some regions has dropped to minus 5 degrees Celsius (23 degrees Fahrenheit).
The authorities have introduced scheduled power cuts several times a day to keep the essential infrastructure working.
On Saturday, the governor of the southern region of Mykolaiv, Vitaly Kim, urged citizens to “endure” the electricity shortages.
Putin on Friday told Germany’s Chancellor Olaf Scholz the Russian strikes, which have destroyed close to half of the Ukrainian energy system, were an “inevitable response to Kyiv’s provocative attacks on Russia’s civilian infrastructure.”
He was referring in particular to the October attack on a bridge linking Moscow-annexed Crimea to the Russian mainland.
Scholz “urged the Russian president to come as quickly as possible to a diplomatic solution, including the withdrawal of Russian troops,” according to his spokesperson.
But Putin accused the West of carrying out “destructive” policies in Ukraine, the Kremlin said, stressing that Western political and financial aid meant Kyiv “completely rejects the idea of any negotiations.”
Ukrainian President Volodymyr Zelenskyy has ruled out talks with Russia while Putin is in power after the Kremlin claimed to have annexed several Ukrainian regions.
The Kremlin also said Saturday that Putin would “in due time” visit the Donbass region of eastern Ukraine, which he claims to have annexed. But Peskov gave no indication of when this could happen.
