Moscow insisted that it would not sell oil that is subject to a price limit agreed upon by the Group of 7 nations, even if it means cutting production, adding to questions over whether the plan, which goes into effect on Monday, will succeed in slowing Russia’s war effort in Ukraine.
The Group of 7 nations on Friday agreed to cap the price of Russian crude at $60 a barrel, putting into place a complex, U.S.-backed plan to limit what Russia, the world’s second largest oil exporter, can charge for its oil exports. Supporters of the plan say it is likely to dent the Kremlin’s finances, while still keeping enough Russian crude on the market to avoid a global oil price shock.
On Sunday, Russian Deputy Prime Minister Alexander Novak said the price cap would have a negative impact on the global market and would contradict World Trade Organization rules. He said that Russia was “working on mechanisms” to undermine enforcement of the cap, without elaborating.
“We will sell oil and oil products only to countries that will work with us on market conditions, even if we would have to lower production,” he said on Rossiya-24, a Russian state news network.
The price cap is set to take effect the same day as the European Union’s embargo on Russian crude imports.
While it was unclear whether the Kremlin would follow through with the threat to curb production — which would also harm Russia’s economy — questions already loomed over whether the new price cap can be enforced. It relies on each party in the supply chain of Russian oil to attest to the price of shipments, and insurers and shippers have warned that records could be falsified by those seeking to keep Russian oil flowing. Russia has repeatedly said it would ignore the policy and refuse to sell oil under a price cap.
On Saturday, President Volodymyr Zelensky of Ukraine criticized the price limit as inadequate to deter Russian aggression. Speaking in a nightly address one day after European Union diplomats reached the agreement following prolonged negotiations, he said the plan’s architects were “trying to avoid hard decisions.”
The $60-per-barrel threshold was a compromise: One group of European maritime nations had demanded the price cap be placed at or above $70 a barrel, to ensure that their business interests would not be disrupted; another group of pro-Ukraine countries had demanded the cap be set at or around $30 a barrel to significantly slash Russia’s revenue. Eventually, the negotiators decided on a price that is in the neighborhood of what major buyers of Russian oil, like China and India, currently pay,
Mr. Zelensky found the deal lacking.
“The logic is obvious: If the price limit for Russian oil is $60 instead of, for example, $30, which Poland and the Baltic countries talked about, then the Russian budget will receive about $100 billion a year,” Mr. Zelensky said.
“This money will go not only to the war and not only to Russia’s further sponsoring of other terrorist regimes and organizations,” he continued. “This money will also be used to further destabilize precisely those countries that are now trying to avoid big decisions.”
The United States had led the push for an agreement along the lines of what was ultimately negotiated. After the deal was announced, Treasury Secretary Janet L. Yellen praised the plan. It helped “achieve our goal of restricting Putin’s primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies,” she said, referring to the Russian leader, Vladimir V. Putin.
Western sanctions have so far failed to weaken Moscow’s energy exports: Russia is on track to earn more this year from oil sales than in 2021, buoyed by a surge in the global price after the war began.
E.U. diplomats have agreed that the price cap should be reviewed every two months, or more frequently if needed, by a committee of policymakers from Group of 7 countries and allies.