Why the West is powerless to cut off Russian oil revenues

Alexey Gromov commented to the Vzglyad business newspaper on the practical implementation of the new G7 sanctions initiative to set a price ceiling for Russian oil supplied to the world market.

“There is no clear mechanism for determining the price ceiling. However, it can be said that if the level of the limit price set by the West is comparable to the price of Russian oil with a sanctions discount, then this will fundamentally change nothing for us. We will calmly work in conditions of such restrictions. Another thing is if the marginal price is noticeably lower. Then we lose our economic interest in selling hydrocarbons to unfriendly countries,” Alexey Gromov says.

“New restrictive measures can be devastating for those countries that initiate such decisions. They can exacerbate conflicts within the European Union, as well as with the rest of the world. Why is the G7 imposing its dictatorship on the whole world, including India and China?” the expert notes.

“This is an extremely painful measure for today's scarce market. The world oil market will remain in deficit for at least a year or two. The gas market, probably two or three years. In such a situation, it is definitely impossible to turn Russia off from the global oil and gas system. Therefore, I think that we will not see global cohesion on the issue of setting a ceiling price for Russian oil,” Gromov says. In his opinion, the West proceeds from the premise that Russia needs to export hydrocarbons to the maximum in order to maintain the stability of the economy.

“But now we cannot spend petrodollars on Western markets. The second way to spend petrodollars is to put them in reserve funds, which are kept in Western banks. Now we don't do that either. A paradoxical situation has arisen: Russia has no special incentives to increase oil and gas exports,” Alexey Gromov concludes.