The price cap dispute escalates: Putin will ban oil exports to certain countries from February, the Taliban don’t want women in NGOs – putting helpers in a dilemma

The dispute over the price cap on Russian oil has escalated. Kremlin boss Vladimir Putin has banned oil deliveries to customers using this mechanism. Moscow now hopes to put pressure on the markets to break the price cap.

Putin has issued a decree banning the sale of oil to countries that have set price caps for the commodity. “Supply of Russian oil and oil products to foreign companies and individuals is prohibited if the price cap mechanism is directly or indirectly built into these contracts,” the document, published Tuesday, said.

The ban on oil shipments will come into effect on February 1. For oil products such as petrol and diesel, the Russian government should set the exact date, although it cannot be before February 1, the decree says. The decision will initially apply until 1 July 2023.

The sales ban is intended to protect “national interests”. However, in individual cases, Russian oil can also be sold if there is a price cap. In this case, a special permit from Putin himself is required.

The price cap for Russian oil was set by the EU in early December and currently stands at $60 (57 euros) per barrel (159 litres). The G7 countries, Australia and Norway have joined the measure. The price cap is one of the sanctions with which the West responds to Kremlin chief Putin’s war of aggression against Ukraine. The upper limit applies to oil transport by sea. This is intended to limit Russian export revenues and thus also the possibilities to finance the Russian war.

Moscow had made it clear before the decision that it rejected the price cap. The Russian leadership speaks of a violation of the free market and has been announcing countermeasures for weeks. The ban was therefore to be expected.

According to experts, it is still unclear whether the price cap will really work. The rationale behind this is to exploit the dominant market position of Western shipping companies and insurance companies to prevent Russia from selling its oil on its own terms in the world market. The price cap is adjusted every two months and is on average about five percent below the average price for Russian crude oil.

Recently, however, there have been reports in the media that Russia has bought up large numbers of old oil tankers to ship the raw material with its own resources. In addition, Moscow has engaged in lively diplomatic activity in recent weeks to garner international support for the issue. Putin raised the issue in negotiations with other oil producers such as Saudi Arabia as well as potential buyers such as China and India. Moscow made it clear that it would refocus on the Asian market to get around the restrictions.

To put pressure on the markets, Russian Energy Minister Alexander Novak also announced this week that Russia is willing to cut oil production by 5 to 7 percent early next year. That would be a drop in production from 500,000 to 700,000 barrels per day. The move is apparently intended to fuel fears of an oil shortage to drive up the price. In addition, potential customers should be deterred from sticking to the price cap in this way. (sda/awp/dpa)