Russian oil prices capped: kyiv predicts the fall of the Russian economy


kyiv wants to believe on Saturday that Russia’s economy will be destroyed sooner or later by the cap on the price of its oil, on which the European Union, the G7 and Australia agreed the day before, in order to limit the means of Moscow to finance the conflict in Ukraine.

« We always reach our goal and Russia’s economy will be destroyed, and it will pay and be responsible for all its crimes, » Ukrainian presidential chief of staff Andriy Yermak said on Telegram.

The Ukrainian authorities have also called on the civilian population to “hold on” in the face of the numerous power cuts which now punctuate their daily life following the Russian strikes which have largely damaged the national electricity grid in recent weeks.

On Friday, the 27 countries of the European Union, the G7 and Australia agreed on « a maximum price of 60 US dollars for crude oil of Russian origin transported by sea », according to the terms of a joint statement.

Mr. Iermak noted that « however, it would have been necessary to lower [le prix plafond] 30 dollars to destroy [l’économie russe] even faster”.

The price of a barrel of Russian oil (crude from the Urals) is currently fluctuating around 65 dollars, barely above the European ceiling, implying a limited impact in the short term.

The agreement was made possible by the consensus reached on Friday by the Twenty-Seven of the European Union.

The finance ministers of the G7 countries had agreed in early September on this tool, designed to deprive Russia of financial means.

The mechanism will come into force on Monday « or very soon after », said the G7 and Australia. It is also on this day that the EU embargo on Russian oil transported by sea begins.

Thus, only oil sold by Russia at a price equal to or less than 60 dollars can continue to be delivered. Beyond this ceiling, it will be prohibited for companies to provide services allowing maritime transport (freight, insurance, etc.).

Price adjustment

Russia, the world’s second largest exporter of crude oil, has still not reacted to the agreement, but Moscow had warned that it would no longer deliver oil to countries that adopted this cap.

Without this mechanism, it would have been easy for him to find new buyers at the market price.

“We will be ready to review and adjust the maximum price if necessary,” assured G7 and Australia in their press release. And a ceiling should also be found for Russian petroleum products from February 5, 2023.

Russia has earned 67 billion euros from its oil sales to the EU since the start of the war in Ukraine, for an annual military budget of around 60 billion, recalls Phuc-Vinh Nguyen, an expert on energy issues at the Jacques Delors Institute.

The instrument proposed by Brussels also plans to add a limit set at 5% below the market price, in the event that Russian oil falls below 60 dollars.

As of Monday, the EU’s embargo on Russian oil by sea will already cut two-thirds of its crude purchases from Russia. Germany and Poland having also decided to stop their deliveries via an oil pipeline by the end of the year, total Russian imports will be affected by more than 90%, according to the Europeans.

» Hold «

In Ukraine, authorities on Saturday again urged civilians to cope despite increasingly difficult living conditions. Several times a day, power cuts plunge millions of Ukrainians into darkness, not to mention the cold that settles in their homes.

Temperatures in some areas have been hovering around -5°C in recent days, and the perceived temperature may be even lower.

“We have to hold on,” Vitaliï Kim, governor of the Mykolaiv region (south), told Ukrainian television.

He announced « four-hour » cuts in his region to deal with « consumption [d’électricité] rising » which threatens to overload the regional energy network.

On the ground, the fighting is « hard » in the east of the country, because « the Russians have had time to prepare » for the attacks by troops from kyiv, said the governor of the Lugansk region, Serguiï Gaïdaï.

According to a morning bulletin from the Ukrainian presidency, the situation is also « difficult » near Bakhmout, a city in the Donetsk region that the Russians have been trying in vain to conquer since the summer.

The battle around Bakhmout took on all the more symbolic importance for Moscow as its conquest would come after a series of humiliating defeats, with the retreats from Kharkiv (northeast) in September and Kherson (south) in November.

The same « difficulties » have been encountered in recent days by kyiv troops in the Kherson region (south), from where the Russian army partly withdrew in November, saying it wanted to consolidate its positions.

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