An EU embargo on Russian oil and a Western-imposed price cap on Russian oil came into effect on Monday as Moscow said it is preparing a response to the policies.
The US led the push to impose a price cap on Russian oil, and the EU agreed to set it at $60 per barrel, or at least 5% below market value. The EU embargo on Russian oil also prohibits issuing insurance for Russian oil shipments unless the crude is sold at or below the cap.
When asked when Russia will respond, Kremlin spokesman Dmitry Peskov said, “The decision is being prepared. One thing is obvious – we will not recognize any price caps.”
The US said that it expects nothing to change, but Peskov disagreed with the assessment. “One thing is obvious and indisputable – adopting these decisions is a step towards destabilizing world energy markets,” Peskov said.
If Russia retaliates by cutting oil production, global prices will rise. Russian Deputy Prime Minister Alexander Novak said Moscow would only sell oil to countries not participating in the price cap, even if that means reducing production.
While the policies haven’t yet impacted oil production or supplies, they did cause a tanker traffic jam. According to The Financial Times, tankers backed up near Turkey as Turkish officials were seeking new proof of insurance for ships transiting the Bosphorus and Dardanelles straits.
The EU ban on Russian oil has exemptions for countries dependent on Russian pipeline oil, including Hungary, which is also exempt from the price cap. “We struggled during talks [in the EU] on the Russian oil price cap and during oil embargo talks, and Hungary was therefore exempted from these measures,” Hungarian Foreign Minister Peter Szijjarto said on Monday.
Early days still but so far the price of oil is going down:
Brent is at 82 USD down from about 87 on Dec 01, while
Ural is at 62 USD down from about 70 on Dec 01
But at the very least this has not started any insecurity price spikes.
https://tradingeconomics.com/commodity/brent-crude-oil
https://tradingeconomics.com/commodity/urals-oil
We need a price cap on the government.
There are other exemptions, Bulgaria, is example. Riots toppled tge previous government but by a sleight if hand another pro-EU governmnt has been formed. This ine is tiptoeing carefully and is given permission to import Russian oil, just to pacify people and take away accusations that the ruling clique is EU bought.
Than there is Japan. They are banning all other Russian imports except from one field — critical for Japan. India can do what it pleases, but any financing or insurance by the shipping tankers cannot come from the West. India can get these without problems as Gulf nations are jumping at the oportunity to get share of this business. Druzhba pioeline for Hungary, Slovakia, Chezh Republic will continue. There are murky rules on export of Khazakh and Azeri oil via Russian port of Novossirsk on Black Sea.
It seems to me that Western financial institutions and insurers are for the sake of short term gain risking losing this business permanently, There is plenty of wealth in Asia to take over such important services.
Are European businesses aware of the danger? Are those who in the name of Ukraine advocate such tremwndous risk to their existence — actually well meaning, or are trying to destroy European prosperity? Are thise real European friends?
A story broke out about US scorched earth plan for defending Taiwan. It apoears that the only reasin for “defending Taiwan” is to buy time and have Taiwan and South Korea build chip factories in US as well as provide engineers for the transition. But after that — “defence” means destroying all Taiwan’s chip making factories, and develop a plan of evacuation to US for engineers. The idea is — delprive China of Taiwan’s chip making production that today meets about 50% of chips worldwide.
The underlying assumption is — China would be hurt and its develooment stalled. I would be shocked if these planers do not know that China posseses all the capabilities to be in its own, The only thing China needs is to SCALE UP the production. an investment not needed before as chips were plentiful and available on the market. Who is likely to become self-sufficient earlier? US with factories yet to be built and engineers yet to be imported, or China? Thousands of engineers from Taiwan are already finding jobs on mainland as China is scaling up. The advantages to engineers are manifold— due to closenes tgey need not uproot their families, and there is no language barrier,
It appears that the main benefit to US from Ukrainian crisis is — degrading industrial, financial and insurance capacities of our allies. And if Russia and China are slowed down in the process, this gives US time to catch up in critical areas. It appears that the price of “defending” alies from China and Russia is VERY steep. The loses of industries is not the only loss — there is also a demand to provide arms to Ukraine and replenish them from US. And since trade deficit for Europe will grow rapidly, budget shortfals will need to be financed, Financed how? Well there will be plenty of distressed assets to swoop, and borrowing dollars is always an option.
Are the dangers Europe and Asia are exposed to acually real? Or is the danger of Europe linking economically up with Asia dangerous to US while actually beneficial to Europe? Isn’t it also true of out allies in Asia and their blossoming trade with China?
Did US had other options? Sure it had. It could have managed global security jointly with China and Russia, preventing smaller countries from profiting by generating
tensions among powers. And then, US should have done what China and Rusdia do — manage ckmmerce differences in a business-like way. That would be tge death of neocons and theit penchant for ideology and zealotism.
Same ideoligues have been consistently wrong about
EVERYTHING, brought US into its deindustrialized state. However, today they have NEW ideas how to dig us out of the mess they out us into. Why do we have to listen to those people any more — beats me.
It looks as if there were enough loopholes in this that nothing really has changed. The short term effects seem to have been mitigated, and shipping companies can gradually shift from being EU based under the jurisdiction of the US to other nations.
The big win for the US is that fuel prices have not spiked.
The price for the oil will go up and the income for US oil exporters go up too. EU people are the losers, as usual. While Scholz and Macron are competing who is more loyal to American oligarchy, the living standards of the ordinary Europeans are hopelessly deteriorating.
By what time do you expect it to go up?
When Russia reduces the export, the price will go up.
OK excellent answer – that should or at least ought to achieve higher prices – but also at the cost of Russian revenue.
Russia reduced the export of the gas, but the income increased because the price is much higher. It may happen the same with the oil.
No it will not, as the Russians cannot export to the higher price – as they cannot transport and insure the oil – so even if the price goes up enough that they could sell less ands earn the same this would require that many companies were willing to act as sanctions breakers for Russia – all to achieve Putin’s goals while getting payed very little extra themselves compared to their financial risks should they be hit by secondary sanctions.
So while it could happen we have seen nothing to suggest that even Indian or Chinese companies are willing to take on such risks to earn Putin a profit.
Russia will sell its oil at market value thru Turkstream to Europe by commingling Qatari oil with a Russian oil.
Though possible there are some issues with that:
1) They are already selling (Ural) oil at a significant discount – so not at market price for other oil (e.g. Brent)
2) It requires the Turkstream operators to take a very significant risk (they will want pay for that risk).
3) The capacity of the Turkstream is insufficient to make up for the loss of shipped oil
4) far from all oilfields are linked up to the Turkstream
So while theoretically a possible solution I kind of doubt that it will be remotely enough even if the Turkstream operator agrees to it – it will also be fairly easy to detect that the oil is using that route so the Turkstream operator will know that the US will know what they are doing.
“No it will not” – about the gas you thought the same.
No I did not think the same about the gas – for many reasons the first of which was that it was not the subject of western sanctions when it happened.
But I ought to say that stating ‘no it will not’ is indicating more certainty than I actually have – it ought to be ‘I strongly doubt it will’.
Thomas needs to put a Word Cap on some bloggers here. Some of them are unnecessarily too long.
Says you.
I read the long responses, even the ones I disagree with. That’s what makes this site so valuable.
This is fast becoming a problem that can escalate into something else. Those involved better have a clear cut strategy and also a significant unity on how to proceed. Wars have often been started due to incompetency….
Are you claiming that this is a problem for the Russians? Just asking because if it does not work or works to increase Russia’s revenue how do you see it escalating things?
I thought that the main issue is controlling producers of energy, OPEC+ has a responsibility to invest in the technology to prospect, produce, transit and store energy priducts to keep the supply matching the demand. Producers — Russia is meant to be the test case — are not accepting the consumers manipulating market. If it works for Russia, Saudis could be next. Excuses are easy to find, What woukd it mean for tge energy producing countries? They would be brough into the colonial system of colonial masters deciding just how much sugar cane they wanted friom Barbados or St.Kitts, Since their economy is tied by trade to the master, there is nothing they ban do but to suffer consequences of whim. It was turn for St.Kitts to lose British trade in sugar cane. Result is — thousands of acres of fallow land. The ineffectiveness of cknsumer managed production is obvious. Even id demand increases, there is no fast scaling up of production,
This very transparent move will not suceed as the producers will not allow it.
Escallation? Of course, the worst kind. Inadvertent shortages of energy will usher global systems crysis. Forget green — without electricity millions of EV will not work.
Today we already do insane things — US complained and complained about gas pipeline from Russia — way before Ukraine conflict. It was a transparent attempt to prevent Germany economically integrate with vast Asian continent and integrate its energy infrastructure with plentiful Russian souces, and prevent its transportation infrastructure link up with Muddle East, Far East andSouth East Asia.
So, solution is shipping gas in gant bottles on ships crossing oceans, burning vast quantities of oil, and spilling some into oceans aling the way. An environmental nightmare.
Seriously, how to take the warmingers seriously? They are anti-market, anti environment and anti-commin sense.
The OPEC countries may fear that this is the case, but it is not – the west could not control all of the OPEC countries in this way.
Simply put no they could not – as the Saudis could afford to close their wells for say a half a year or a year and the west could not afford the consequences – moreover if the west tried then several of the other OPEC countries would react – so if your theory is correct then they should now react with a very strong reduction in output – actually they should have threatened such a cut already and that would have driven prices up so given that what they have done is a very modest cut – well you explain why they are not behaving as they should if their fear was as you point out.
As stated if their fear was that this was the start of an attempt at consumer control – they would have threatened very significant cuts to production and we would already face 120+ USD per barrel – why do you think we are not?
Just not seeing any evidence beyond a very modest Saudi cut to production that you are right – as threats would work just fine why do you suppose that they are not even doing that – cutting production later will come at actual costs, but would be effective, but at present no actual threats that this will happen and Russian shipping is already being stopped.
Our proxy war in Ukraine, for instance 😉
https://www.armstrongeconomics.com/markets-by-sector/energy/europes-leadership-pure-insanity/
Europe’s Leadership – Pure Insanity
Good article, thanks for posting this link.
https://iz.ru/1436532/2022-12-06/vengriia-zablokirovala-paket-pomoshchi-ot-es-dlia-ukrainy-na-eu18-mlrd
“Hungary blocks €18bn EU aid package for Ukraine
Associated Press: Hungary blocks €18bn EU aid package for Ukraine”
You get the distinct impression the EU’s financial aid will never run dry. It proportional to Zelensky’s begging skills.
If Russia destroys more of Ukraine’s infrastructure, that should in practice increase and accelerate the EU’s “loans” into Kiev while rapidly destroying the euro and Europe’s economic base.
That would also translate into more expensive Russian oil and gas. Is that what the EU wants or is this Global North-wide theatrical event a mass depopulation cover?
The Central Banks are bankrupt already. The gold backed Quantum Financial System is operational in over 100 countries. BRICS was just the beginning. Ukraine is a money laundering operation for the globalists using Crypto which has failed. Ukraine never registered their borders. The actor/comdian Zelinsky is George Soros’ cousin, and installed stooge.
Having read quite a few articles about the new oil trading rules was quite interesting. This seems to be a LOT less impactful than I imagined.
Two things seems to have lessened this impact. First of all, the global economic slowdown has reduced demand worldwide. Second of all, everyone has had a long time to prepare for this.
The net effect seems to be that this is a huge step towards decoupling US/EU from Russia/China/India economically. Trump started the idea of decoupling a few years ago, and this builds on what he started.
Russia seems to be providing both Pakistan and India with fuel, so this decoupling might also unite most of Asia.
The good news for the US: moving forward, probably permanently, Russia will sell fuel to Asia for less than what the US sells it to EU.
Good news for China and India and Pakistan: they get fuel cheaper than other nations, saving them money and giving their industries an advantage over other nation’s industries.
Upside for Russia: nations that get cheaper fuel from Russia will view Russia quite favorably.
After day 1, this all seems pretty ok.
The oil price cap scheme is one of the most stupid yet from the Biden regime.
Somehow they’ve convinced themselves that they can order China, Russia and India how to trade Russian oil
The arrogance is astonishing.
In the process they’ve sent a clear signal to those 3 nations, OPEC+ and BRICS that they could one day be next. This will force these important groupings closer together.
Within 24 hours the law of unintended consequences has kicked in. Turkey has thrown a spanner intp the works demanding insurance papers for all oil travelling through the Bosphorus, in effect blocking oil getting to the EU and pushing up the price per barrel.
The next move will be the Russian response, which looks like it was worked out long ago, to ban any oil sales from Russia or via 3rd parties to any nation that signed on to the retarded idea.
Following this I expect OPEC+, which despises Biden and his fools, to cut production forcing the price up even higher.
The entire time, Russian oil will continue to be sold to Russia’s clients at a price the parties agree to, with one difference – it will be insured and shipped via non-Western companies and nations. Oh – and Russia will continue to win in Ukraine.
Net result – Russia makes a killing, Russia /China
alliance gets even stronger as will OPEC+ and BRICS. And Russia still wins in Ukraine.
Nicely played Joe & Co, even for a group of imbeciles such as yourselves while we have come to expect failure, lies and disaster at epic levels, this latest idea exceeds all expectations.
They just don’t care about the interests of Europeans. Maybe they are hoping, after bringing German people to the poverty, it would be easier to establish in Germany a similar regime to what they had in 1930th or what they did established in Ukraine. The point is: American oligarchy want the escalation of this European war, so their goal could be the Ukrainization of Europe.
True, but this scheme will also backfire on the US. Yes the US has energy to sell to the EU but soon, the EU won’t be able to buy it unless provided with significant discounts. The EU is heading towards severe depression after all.
The Biden regime also seem to assume that a dependent Europe will continue to submit to them after this disaster. However they’re underestimating the anger against the US. European nations could easily pivot to Russia/China especially if their leaders change (particularly in Germany), and China / Russia come knocking with insane energy and trade deals.
American rulers have several reasons to do what they are doing: 1 – the mess in Europe forces the evacuation of European business and European wealth to US. 2 – they are hoping, the escalation of the war would cripple Russian economy and eventually create the conditions for the regime change. If the regime change in Russia is successful, they can cut China from Russian resources, which can also create the conditions for the regime change in China. 3 – if they are successful in establishing the totalitarian regimes in EU, it would be easier for them to do the same in US.
Explain more about the Turkey part??? I’ll look for that. Would the Suez Canal be subject to the same … inspections? Isn’t this something that the US would be in favor of in order to enforce their new regulations?
Sorry for all the questions. On the other hand, the implication of your comments strongly implies that Turkey is a NATO nation in name only, and is now firmly in alliance with Russia.
No they have planned to deny them the use of western tankers and insurance – to the extend they can provide this themselves they are not obliged to comply with the price cap – though they might risk secondary sanctions at some point.
Not a lot of evidence that the OPEC countries see it this way, if they did they could have threatened a supply cut and alone by doing so have driven the prices up just before December 5 – the Saudis have been refusing an increase in supply but not made a supply cut big enough to jack prices up significantly.
That is what it was supposed to do – EU is not supposed to buy any oil send by ship after December 5, so any EU customers would violate sanctions. And prices of Brent oil (i.e. not Russian oil) have dropped every day after December 1.
https://tradingeconomics.com/commodity/brent-crude-oil
Yes again not seeing evidence of this even becoming necessary as Ural oil is now trading at less than the price cap:
https://tradingeconomics.com/commodity/urals-oil
Would have been much more effective if they could have threatened this before the price cap was introduced and they would therefore not have to lose as much profit – but still admittedly possible.
This would only be possible if you supposed that there was a massive excess capacity in tanker transport – that is not the case, and there were insurance companies with the fortitude to be able to provide insurance – as you just pointed out the Turks checked and there was no insurance so the tankers stopped.
Thanks for your response, but it unfortunately reveals your lack of understanding of geopolitics.
Again, Russia will continue to sell its oil to any nation seeking to buy it,.at a price they agree to sell it for. They’ll simply ignore the G7, as will China, India etc. Insurance, shipping etc will.be sorted out between the parties.
What will the G7 nations do? Block Chinese maritime vessels? Board Russian ones? LOL good luck with that.
China and OPEC are firmly in Russia’s camp, all seek to create their own system as an alternative to the western system. They will work with Moscow to achieve that objective, including frustrating this stupid oil price cap scheme.
The West is the weakest it’s been since WW2. Militarily, economically, socially, culturally, technologically it is far weaker than the China/Russia axis. America is broken, and it will continue to be.
Therefore, China/Russia wins. Neither nation wants to destroy the west, they simply want to be free of it and that’s all there is to it.
I may be ignorant of geopolitics (though at present it is not an issue) as what I have pointed to is not the geopolitics of the issue, but the practical problems confronting Russia/OPEC/China/India:
You seem to ignore my points: Ships have to be built and insurance companies have to be recognized.
Insurance is incredibly expensive as oil spills are incredibly expensive – it is a numbers game so insurance in the west will go up if some in e.g. India is going to provide it for Russian shipping (which will also then be much more expensive than that previously provided by western insurance companies).
Turkey did exactly that i.e. board Russian tankers inspect papers and denied (blocked) their further travel – because of lack of insurance.
Very likely their interests are aligned as you describe, but as the existing tankers are already nearly fully booked by western nations to bring them non Russian oil – so Russia, China, India and OPEC countries have to build new tankers to ship Russian oil if that is their desire.
Not going to get into that as it is very difficult to prove one way or the other – what I can say we have evidence for is that Russia is so weak that it cannot beat Ukraine getting very limited assistance from the west in what will very soon be a year of fighting – and that with western countries providing Ukraine with less than 1% of their GDP in military assistance: https://www.statista.com/chart/27331/countries-committing-the-most-of-their-gdp-to-ukraine-aid/
I doubt that they will win, but if they do then it will be at the cost of the west so killing the goose that lays the golden eggs.