Russia may ban oil sales and set a maximum discount in response to the price ceiling

Vedomosti newspaper reported on Wednesday that Russia is considering three options, including banning oil sales to some countries and setting a maximum discount at which it will sell its crude, in order to counter the price cap imposed by Western powers on Russian oil.

The $60 per barrel price cap, set by the Group of Seven countries, the European Union and Australia, went into effect on Monday in an effort to curtail Russia’s ability to fund its war in Ukraine.

In response, the Kremlin and the Russian government are considering banning oil sales to all countries that supported this cap, Vedomosti reported, citing two anonymous sources close to the government.

This option would also prohibit sales through intermediaries, not just from Russia directly. The second option under consideration is to ban exports under contracts that include a price ceiling clause, regardless of the beneficiary country.

The newspaper stated that the third option would set a maximum deduction from the Russian Urals crude prices for international benchmarking materials.

Russian Deputy Prime Minister Alexander Novak said on Tuesday that Russia’s response mechanism to the oil price ceiling would come into force in December. Earlier, he said that Russia might reduce its oil production, but not significantly.

Bloomberg reported that Russia is also considering setting a minimum price for its international oil sales.