Three Scenarios for Russia's Response to the Oil Price Ceiling

Sergey Kondratiev, Deputy Head of the Economic Department of the Institute for Energy and Finance, commented to Gazeta.Ru on the Russia's possible responses to the introduction of a cap on oil prices at $60 per barrel.

Sergey Kondratiev suggested that Russia has three options for responding to the introduction of a ceiling on oil prices from the Russian Federation at $60 per barrel. First, Russia can formalize a ban on the sale of fuel to countries that supported such a decision. Secondly, supplies to such countries of sensitive raw materials, such as nuclear fuel, may be limited. In addition, Russia may introduce its own price ceiling for such raw materials - at a level above the market.

“The Russian Federation may formalize a ban on the sale of oil to companies from the European Union, the United States, Canada and Australia, which supported the price ceiling. The same countries introduced a ban on the purchase of oil from Russia. Their logic is clear – to prevent the Russian budget from receiving additional oil and gas revenues,” Kondratiev said.

The economist noted that Russia will have to decide whether to supply fuel to Japan and Bulgaria. “They formally supported the ceiling. But oil supplies to Japan were pulled out from under the price ceiling by the G7 countries. Bulgaria has supported the price ceiling as an EU country, while being exempted from EU sanctions,” he explained.

Also, according to Kondratiev, Russia may introduce asymmetric measures that will make it difficult for EU countries, the US, Canada and Australia to work in other energy markets.

“Russia could consider the possibility of limiting the supply of sensitive raw materials for these countries. For example, the EU countries are highly dependent on the supply of nuclear fuel from Russia, certain types of metals that are needed for the industrial sector,” Kondratiev said.