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.