From February next year, Russia will stop exporting oil to European Union and G7 countries. Russian President Vladimir Putin issued a decree on the basis of which the Russian Federation will take retaliatory measures for the price cap on the part of the mentioned countries on Russian oil.
Embargo 5 months
The export embargo by Russia will be in place for five months. The Kremlin’s retaliatory measure comes after countries in the European Union and the Group of Seven of the world’s economically strongest nations (G7) agreed to impose a price cap on Russian oil. The ceiling is set at $60 per barrel, although similar to the price at which Russia currently exports oil, considerably lower than Russia sold its oil for a substantial part of 2022.
Deepening Russia’s deficit
Russian Finance Minister Anton Siluanov has already announced that the price cap will most likely deepen the Russian state budget deficit for 2023, which for now was projected to be two percent of GDP. It was precisely the goal of the price cap to limit the Russian Federation’s revenues from oil sales, which should weaken its ability to finance its military aggression in Ukraine. The world price of Brent crude oil did not react in virtually any way to Putin’s announcement, remaining steady at just below $85 a barrel.
