Russia warned on Monday that it would retaliate against a plan to place a price cap on Russian oil that the G7 has agreed to implement.
“There can only be retaliatory measures,” Kremlin spokesman Dmitry Peskov told reporters, according to Reuters.
Treasury Secretary Janet Yellen and other finance ministers from the G7 announced their intention to implement a price cap on Russian oil on Friday. But the plan requires cooperation from Moscow, and Russian officials have made clear they would not comply.
“We will simply not supply oil and petroleum products to such companies or states that impose restrictions, as we will not work non-competitively,” Russian Deputy Prime Minister Alexander Novak said last week.
If Russia retaliates by cutting oil production, global prices could soar to astronomical levels, experts and analysts have said. Analysts at JPMorgan Chase said that if Russia reduces oil output by 3 million barrels per day, it would bring prices up to $190 per barrel. In the worst-case scenario, Russia would slash production by 5 million barrels, bringing prices up to $380 per barrel.
The details of how the G7 plans to impose the price cap aren’t clear. In a statement, the G7 ministers said that the price will be set by “a broad coalition” and that the cap will be implemented along with the next round of EU sanctions, which are set to take effect in December.
The EU sanctions will ban the import of Russian oil, with some exemptions, and will also prohibit issuing insurance for maritime shipments of Russian crude. Russia relies on Europe for shipping insurance, and while it could find alternatives, an initial shock could raise oil prices.
The idea of the plan would be that the EU ban on insurance would be reversed if the oil is being sold at a set price. But the plan also relies on the cooperation of Russian oil buyers, including China and India, who are already purchasing Russian crude at a discount and have little reason to risk their arrangement with Moscow.
This is perhaps the most ridiculous outcome of the sanctions on Russia. If I understand the plan correctly, the oil consumers are going to tell the oil producers and exporters what they are going to charge for oil and how much they will produce. Does anyone think prior to issuing these dictates? And if they are thinking, how does this possibly register in their brains as a reasonable idea?
The plan is to deny the Russians insurance for shipping oil if the price is over the limit. If the Russians can convince ports and countries that they can ‘insure’ the transport then it will have no effect.
As it stands the Russians are already selling their oil (Ural) at a significant discount to China and India – this new move is likely to make it possible for the Indians and Chinese (and any other customers) able to negotiate a better discount.
It may also make the shipping ‘agents’ able to charge a higher price for their job – AFAIK the Russians do not have the shipping tonnage themselves to be able to ship all the oil they now have to ship much further than before.
Finally the Russians can’t just let the oil stay in the ground as the wells will then have to be re-drilled – something about oil actually ‘coagulating’ in the pipes in the very cold temperatures of Siberia.
It is my understanding that the insurance issue has been muted by an array of willing insurers in both India and China, along with Lloyds insisting that it will continue doing business with all oil transporters it has regularly done business with. Lloyd’s position is that they do business with transporters and the origins of the oil are not their concern and never were. The US and the EU, especially, trying to intercede in the oil markets seems a guarantee to further isolate themselves, being the oil needy from the oil producers. Biden’s visit to the Saudis seemed to indicate that the oil producers are willing to continue to do what best suits their self interest first and foremost, and if that means the EU energy needs aren’t met well,…. so be it. The US was never a reliable ally with those in the oil export markets anyway.
<>At present, there seems to be an “arrangement” where oil is moving to India, being refined, and then leaving for EU markets. This type of back door access seems to be how the EU will cope with its energy needs for the time being. What all of this means is that if there is a negotiated end to the war in Ukraine, the diplomacy will have an added layer of complexity that will include a reordering of the trade relationship between Russia and the west on Russia’s terms. That is where this crisis is headed. Ukraine is being battered in a war encouraged by the US/EU. The gamesmanship that comes with dramatic pronouncements and vitriolic threats needs to end. The children need to be cleared from the room and the adults need to engage in adult conversation to end this war.
OK, did not know this, do you have a link for the Lloyds story? Only asking because that is the most interesting part as the other arrangements will also mean higher costs for insurance which Lloyds would not.
The interesting part being what consequences will Lloyds face, as one can’t imagine any of the others would voluntarily kill their own business.
Not seeing how you imagine this would work, why would e.g. Saudi Arabia be less willing to sell to the US or EU?
Their self interests are to maximize their profits why would that entail not selling to EU/US?
That would seem to be the likely thing to happen when the Indian’s can buy Ural at a significant discount.
Not clear to me how you see this working out?
Are you talking about Russian state television, because from western sources there is AFAIK little vitriol.
Again not seeing this happening, as I see it the west has concluded that the Russian invasion has to be nixed as they otherwise fear that China will take Taiwan next.
That there will be a general spread of wars to annex territories from weaker neighbors in many places in the world – sort of a new ‘domino theory’ and hence this has to be resisted even beyond what the consequences of Russia annexing Ukraine would justify by itself.
“UK Dodges Global Insurance Ban on Russian Oil to Keep Cargo Moving,” Tradewinds: The Global Shipping News, Aug. 2nd, 2022.
<>The Saudis told Biden they would not increase production according to US reports of Biden’s meeting with MBS. The price of oil is determined not simply by maximizing productivity but also by creating scarcity. It is often the case that less is more where oil pricing is concerned. Less available oil the higher the price. The higher the price the less production is needed. That is the current situation and the oil producers are taking advantage of market scarcity. Even Venezuela has been reluctant to sell oil to US markets and is using the removal of sanctions as a baseline for sending oil to the US which the US has reportedly offered to do.
<>No I am not talking about Russian state TV at all. I am talking about the declarations of Boris Johnson, Biden, Macron, the Polish PM, and the Baltic states who all, in sum, have made provocatively charged statements about regime change in Russia, escalating sanctions that carry threats to nations unwilling to participate, threats of retribution on the people of Russia, and comedic reprisals against Russian artists, ballet, athletes,….this is really immaturity masquerading as statesmanship.
<>No one sees the war in Ukraine as an imperialistic war by Russia. That is state propaganda issued by the US led western nations who pushed for this war by trying to expand NATO when they knew full well that it would cause Russia to react. The bulk of the world has not complied with western sanctions on Russia, and while the war is catastrophic on multiple levels, very few countries aside from those of the west see Russia as primarily responsible for it.
<>As for the escalating tensions in Asia, it is the US that has instigated the Taiwan situation. Taiwan is internationally recognized as part of China and the US has agreed to that since the 1970’s. That is the primary condition of any relationship with China. To abruptly deny that is diplomatic treachery of the highest order. All of Asia understands that. That is why the President of S. Korea did not meet with Pelosi after her visit to Taiwan. The US is in uncharted waters on this one with very few allies willing to back this charade.
Thanks for the link – it seems to be all of UK, which is kind of important as they are the dominant insurers and an EU ban then has very little effect.
Oil price is a product of supply vs demand plus expectations on future scarcity – the ineffectiveness of the ban on insurance would yield lower prices the Saudi’s not increasing production yields higher prices.
Makes them sound ‘evil’ they are just doing business like the Indians.
Sounds like the very minimum I would require if I was negotiating for Venezuela.
These western declarations are tough they do however not even come close to the vitriol we hear from Russian state television and the threats aired there.
That is how it is seen in Ukraine and how the Kenyan ambassador to the UN saw it – more importantly to us it is what it is, as in it is solving a border issue by force with the end goal of territorial conquest – that may not be imperialistic, but then nor would China taking back Taiwan be.
China’s UnionPay paymentsystem has stopped accepting cards issued by Russian banks under Western sanctions… so it would seem that even the Chinese are ‘supporting the sanctions (albeit reluctantly).
We pretty much agree on this, that however does not make it any more palatable to western economic interests to have China take back Taiwan – which is why I do not see them backing down.
What I’m arguing is not that that the US or the wider west is right to be against China taking back Taiwan, but that they can’t easily cope with the fallout from it.
More to the point the threat of contagion when other nations rightly or wrongly solves their border issue by force is what is the issue – there are as the Kenyan ambassador to the UN said very many countries in the world with such issues.
If Mexico, provoked by an ethnic cleansing and backed by the BRICS, were to take back California, would it be just a border issue to be resolved by negotiations?
That is exactly the question – do you want wars all over the world to solve such issues or the claim that there are such issues?
Ok, now add Marines massed on the border and off-shore Veracruz and the Gulf of California with the clear intent of invasion. … Still just continue to negotiate?
Yes – until shots are fired or borders crossed, why would I stop negotiating?
The mentioned ongoing ethnic cleansing with thousands of Chicanos already dead, all southern California cut off from electricity, their social security and pensions terminated, their banks decertified, their language outlawed, is this nothing offensive simply because perpetrated by the US against its own citizens within its own borders? Mexico should still devote its efforts to negotiating the border issue?
What makes you think I believe this to be not offensive?
However it does not justify Mexico going to war / invading.
As far as I know Mexico is not striving to take back land so they should negotiate for better terms for their minorities on the other side of the border – that is what Denmark and Germany did.
Because previously you stipulated, “until a shot was fired.”
Anyway, the US army can continue killing Chicanos, albeit you find it offensive, until a negotiated settlement has been reached? The bully can continue beating the weakling to death until he agrees to be a reasonable decent fellow?
Is that a surprise on an anti war site?
I’m nearly certain that more Mexicans and more Chicanos will be killed if Mexico attacks the US to save the Chicanos – war almost always end up that way – do you really expect the Mexicans can impose better conditions for the Chicanos by force?
Yes – we have over the centuries learned that war seldom leads to less suffering and that applying pressure through other means or simply appealing to the other nation to behave according to human rights more often than war leads to less suffering.
As in the 500 yr Irish or the 100 yr. Palestinian slaughter?
Your body-count yardstick is absurdly reductionist? On the basis of a lesser evil calculation of statistical probability, to passively watch your neighbor slaughtered simply for being desperately poor, is not only complicity, but either god-like egomania or subhuman nihilism.
Are you for all nations just going to war with their neighbors when they claim that people of their erstwhile nationality are being mistreated by that neighbor – or what standards would you apply.
Only asking because that was how we did things in Europe until 1648 – that led to practically nonstop wars for centuries.
Many first rate thinkers (Chomsky, Sachs, …) take your position. But, except as a kinda nihilist pragmatism I simply can’t understand it. (1) I take the view that one is morally obliged to closely examine each case for a Right and Wrong, and take the side of Right. (2)To pragmatically label both Wrong abdicates this responsibility and accedes to the nihilism of the strong eating the weak. (3) In a finding of two wrongs, as obtained with the Medieval war lords (the War of the Roses), one must chose to protect “the humble folk” (Becket) shunning both gangsters. (4)Your example, the Reformation 30 Yrs War, in its largest sense, is the third case, two Rights, tragedy -like the Antigone, which only more clearly points the human condition (that which makes human beings human) of seeking meaning against the possibility there is none.
So, finally, my study of the particulars of the Washington v Russia war in the Ukraine discovers the rectitude of the latter, …and even more clearly, the vicious ferocity of the former.
I have arrived at this position because of the very poor record nations have on determining when their ‘help’ – on the whole it can only as I see it be justified when the nation(s) taking part in such actions do not acquire territory or rights to exploiting natural resources in the country where they intervene – so NATO in Kosovo or Bosnia?
How do you determine what is right – in the case of Ukraine the Russians claim to be right and so do the Ukrainians – given that the Russians (according to the Ukrainians) fermented the insurrection in the Donbas I’d say it is neigh on impossible for us to say what is right.
If you have paid attention I do not say that both parties are just wrong, but that Putin is wrong (or an order of magnitude more so) – so I think that sanctions are justified – but I would still shy away from armed intervention.
With this argument you can justify the Russian invasion as-well as NATO getting directly involved – is that what you want?
Washington is not sending troops to Ukraine – the Russians are – so according to your philosophy the wrong that Washington is doing is not committing forces to do what most of the west sees as Putin bullying the Ukrainians – that would be the consequences of your version of international law.
I think what this means, is that US taxpayers started another war we footed the bill for for a select few industries like weaopons and energy to expand their wealth as we all got poorer and dollar got weaker. Chinas ultimate goal, and likely alliance with Russia outside of it’s oil needs is it’s quest to replace the dollar as the global curency marker and OPEC denomination with either the Yen or a neutral marker.
We had literall no stake in Ukraine, yet instigated the war by stoking unreset and helping the protestors that overthrew the pro Kremlin governent in 2014. They only gains we will get are the weapons sales, which are part of a US presidents jobs.
Essentially, globallly, we sell, energy, weaponry, and war. It’s what we do best. Biden has done a great job spening billions he will skim from in kickbacks and curried political favors, his son is raking it in. Hell those deals started before he was even electing (Burisma). An energy company, no less.
European and the US economies are going to be collapsing, the wealth transfer will continue, and the disappearance of the middle clas in the US, and Eurpose, will be downgraded to a giant subclass of the working, non working, and wealthy. The elites dream.
Yes, but we are assuming that we know exactly what the real objective is. Who is the target of this decision to control oil market.
OPEC+, in its meeting just decided to REDUCE oil production. Not by a lot, but just enough to erase the token increase Saudis gave Biden. Many candid comments afterwards identified this oil price capping schema as targeting Opec+. The idea that a geopolitical reason can be used as an excuse to control oil market — sends a clear signal that ANY reason can be used in the future for similar controls. Gulf and lack of democracy — for example.
OPEC+ is viewing this as a means to breakung up the cartel. If ine country is targeted — that coukd give others increased share of the market. Greed is supposed to be the key motivator here. Getting Russia out neans more money to others butvalso higher prices. US is desparate for higher prices, as its fracking priducts are expensive and were ALWAYS sold at a huge loss. Losses were papered over by financing — cannot do it any more. US Treasuries are not selling. Thus, force the increase in gas and oil prices, and increase interest rates to attract capital — primarily from our European and Asian allies. Why only their capital? Because everybody else is afraid of parkung money in US – no matter the rate.
Consequence? Our allies currencies are tanking. Euro, British Pound, Swiss Frank, Japanese Yen.
It remains to be seen — will US go for jagular to force countries to accept the cap, and lose Russian energy.
For Russia, China and other OPEC+ members this will be the ultimate test of various countries strenght. Giving them a map of action. Which countries to help and which to leave to their fate until curcumstances change.
Because, it’s a reasonable idea to create an econonic collapse, continued concentration and transfer of wealth to the wealty, and the desparation of poeple in a historic collapse will be desperate enough to accept their world war that nobody wants right now except for the elite.
During WW2, the US and Britain very quickly established entirely new “war insurance” to cover merchant shipping threatened by mines and U-Boats in British waters.
India and China can insure their own ships. They are quite competent as business people. If they want to buy oil, the US and Britain cannot stop them by refusing to sell them insurance. That would just destroy the market position of US and UK insurers in the maritime insurance market.
After all, neither nation actually has its own ships, it is entirely a financial issue. China especially has plenty of its own money.
They can but at costs which are higher that would imply a lower profit for Russia unless you think the Indians are not competent business people 🙂
It certainly would make their position less dominant – so they are not likely to be doing this voluntarily – advantages of scale has so far been the reason that the prices are so low, so this implies higher prices for all in the insurance market.
China does, but if they have to spend it on additional insurance costs they are likely to want an even higher discount on Ural oil.
I meant that the UK and US no longer have ships of their own. They just provide the financial services, and others can do that as well.
Most things done in India ultimately cost less than doing them in NYC or London, so the cost is just that of creating the option and making the move. Once that is forced, there is no reason, no cost savings to be had, by going back again.
Yes others can provide insurance but as they do so at lower volume (if UK does not provide it) then the cost will be higher and the profit lower.
Not insurance that has to cover oil spills everywhere in the world – the price of the companies is very strongly linked to the size of the operation risk spread is lower and thus cheaper – labor costs is here fairly irrelevant.
“There can only be retaliatory measures.”
Every action and reaction in this conflict only leads to escalation. The only outcome will be world war. Those leading us to Armageddon don’t see it.
https://patternofhistory.wordpress.com/
The end of an escalatory spiral is not necessarily world war, though we saw in WW1 that it very quickly can be.
The key concept is “escalation dominance.” Russia had it. The US did not believe that, called their bluff, and they were not bluffing.
Russia still has it.
The key factor in how this comes out is the idiocy of Anthony Blinken, and his control of Joe Biden. They did this. It is Biden’s War. The EU followed.
At some point Blinken will lose control, of Biden or of the EU. He will
lose control, and so the US will lose the war. That is the break point in this escalation. It need not end in world war, but it must end in US defeat and the reduction of Ukraine to rump vassal status. It is all on Biden, who sooner or later will blame Blinken, but it won’t save Biden.
Too bad the US is in a corner with such bad alternatives to Biden, because he has self destructed. It is only a matter of time.
There are always better alternatives. Only problem is the people voting in the two major parties don’t vote for them, so two bellicose idiots always win the nominations.
1. Russia can and will reduce oil production and being the #2 supplier on the market, this will have a huge impact.
2. Russia can start seizing EU / U.S. property.
3. As a last resort, Russia could disrupt oil shipment to the EU with military force. Blocking the Suez Canal would add much delay and cost to Europe.
Winter is coming to EU a lot earlier than December 21, 2022….!
Whatever the exact date, “Winter Is Coming” like GoT, and the US simply does not care. It is not living behind the Wall. The EU either tends to its own business, or its voters will rebel (as they just started yesterday in the Czech Republic).
Liz Truss won’t last long that way. Nor will the German “I’m not quite Merkle” fellow who is trying to make it up as he goes.
Well, it seems like Eastern Europeans (with exception of Ukraine) are smarter than Western Europeans, hence the protest in Czech Republic…! The Western Europeans have too much trust in their governments and think somehow they will be taken care of this winter…!
“If Moscow retaliates by cutting oil production, it would send global prices skyrocketing”
If Albright was still wasting good oxygen, she’d say it was “worth it”. Dead woman and children or the normal folk being economically devastated doesn’t affect those in power.
What on earth did they expect??? Tell Russia you don’t want their oil or gas, try elsewhere to find enough and fail, tell Russia etc to sell at your price to help you after you did your best to ruin Russia by illegal sanctions!
”
Russia Warns It Will Retaliate to G7 Oil Price Cap If Moscow retaliates by cutting oil production, it would send global prices skyrocketing”
This is right out of the obama / Biden playbook to pander to the Green New Deal cabal of World Economic Forum globalists.