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G7 begins to press Russia on Ukraine with oil price cap

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2022-12-05T03:48:02Z

A Group of Seven (G7) price cap on Russian seaborne oil came into force on Monday as the West tries to limit Moscow’s ability to finance its war in Ukraine, though Russia has said it will not abide by the measure even if it has to cut production.

The G7 nations and Australia on Friday agreed a $60 per barrel price cap on Russian seaborne crude oil after European Union members overcame resistance from Poland. Russia is the world’s second-largest oil exporter.

Ukrainian President Volodymyr Zelenskiy said the world had shown weakness by setting the cap at that level while Russian Deputy Prime Minister Alexander Novak said on Sunday it was a gross interference that contradicted the rules of free trade.

“We are working on mechanisms to prohibit the use of a price cap instrument, regardless of what level is set, because such interference could further destabilise the market,” said Novak, the Russian government official in charge of its oil, gas, atomic energy and coal.

“We will sell oil and petroleum products only to those countries that will work with us under market conditions, even if we have to reduce production a little,” he said.

The G7 agreement allows Russian oil to be shipped to third-party countries using G7 and EU tankers, insurance companies and credit institutions, only if the cargo is bought at or below the $60 per barrel cap.

Industry players and a U.S. official said in October that Russia can access enough tankers to ship most of its oil beyond the reach of the cap, underscoring the limits of the most ambitious plan yet to curb Russia’s wartime revenue.

According to Zelenskiy, the $60 cap would do little to deter Russia from waging war in Ukraine. “You wouldn’t call it a serious decision to set such a limit for Russian prices, which is quite comfortable for the budget of a terrorist state.”

The United States and its allies have imposed sweeping sanctions on Russia since it invaded Ukraine on Feb. 24 and sent billions of dollars in aid to the Ukrainian government.

French President Emmanuel Macron, however, drew criticism from Ukraine and its Baltic allies over the weekend for suggesting the West should consider Russia’s need for security guarantees if it agrees to talks to end the war.

Zelenskiy’s aide, Mykhailo Podolyak, said the world needed security guarantees from Russia, not the other way around.

In Ukraine, Russia has been pounding power infrastructure since early October, causing blackouts and leaving millions without heating as temperatures plummet.

Russia says the assaults do not target civilians and are meant to reduce Ukraine’s ability to fight.

Ukraine says the attacks are a war crime.

Zelenskiy, in a video address on Sunday, urged citizens to be patient and strong in resisting the rigours of winter.

“To get through this winter, we must be even more resilient and even more united than ever,” he said.

Kyiv Mayor Vitaliy Klitschko said on Telegram that blackouts would be confined from Monday to planned “stabilisation” cutoffs to get the grid working again, but added the situation remained “difficult”.

Ukraine’s largest power supplier, DTEK, said blackouts were planned for three other regions – Odesa, Donetsk and Dnipropetrovsk in Ukraine’s south and east.

In Kherson, largely without power since Russian forces abandoned the southern city last month, the regional governor said 85% of customers had electricity.

On the battlefront, Zelenskiy said Ukrainian forces were holding positions along the front line, including near Bakhmut, viewed as Russia’s next target in their advance through Donetsk.

Ukraine’s military said Russian forces pressed for improved tactical positions to advance on Bakhmut and on the town of Avdiivka, just inside Ukrainian-controlled territory.

Russia’s defence ministry said its troops were conducting successful operations in the area of Bakhmut and had pushed back Ukrainian attacks in the Donetsk direction.

Russian forces also shelled 25 settlements along front lines in the south, including Kherson and Nikopol – on the Ukrainian-held side of the Kakhovka reservoir, opposite the Russian-held Zaporizhzhia nuclear power plant.

Anatoliy Kurtev, the secretary of the Zaporizhzhia city administration, said on Monday that Russian forces had overnight hit industrial and energy infrastructure with rockets.

Reuters could not independently verify battlefield reports.

The head of U.S. intelligence said fighting in Ukraine was running at a “reduced tempo” and that militaries on both sides were looking to refit and resupply to prepare for a counter-offensive after the winter.

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