The Group of Seven price limitation on Russian seaborne oil went into effect on Monday, as the West attempts to limit Moscow's ability to finance its conflict in Ukraine. However, Russia has stated that it will not comply with the measure, even if it requires it to reduce production.
The price ceiling, which will be enforced by the G7, the EU, and Australia, is in addition to the EU's ban on imports of Russian petroleum by sea and equivalent pledges by the United States, Canada, Japan, and the United Kingdom.
It permits the shipment of Russian oil to third parties through G7 and EU tankers, insurance firms, and financial institutions, but only if the cargo is purchased at or below the price cap.
Given that the world's leading transportation and insurance companies are headquartered in G7 nations, the cap could make it challenging for Moscow to sell its oil at a higher price.
Russia, the second-largest oil exporter in the world, announced on Sunday that it would not accept the restriction and would not sell oil subject to it, even if it had to reduce production.
Since Soviet geologists discovered oil and gas in the wetlands of Siberia in the decades after World War II, oil and gas exports to Europe have been one of Russia's primary sources of foreign currency profits.
Due to the sensitivity of the matter, a person who requested anonymity told Reuters that a decree was being drafted to restrict Russian enterprises and dealers from associating with nations and companies governed by the cap.
Essentially, a decree of this nature would prohibit the export of oil and petroleum products to countries and businesses that use them.
However, with the price ceiling established at $60 per barrel, which is not too much below the $67 level at which it ended on Friday URL-A, the EU and G7 countries anticipate that Russia will continue to have the incentive to sell oil at this price, albeit for reduced profits.
Following the EU's price cap deal, China's foreign ministry stated on Monday that Beijing would continue its energy cooperation with Russia based on mutual respect and mutual profit, as reported by Russia's RIA news agency.
The EU and the G7 will review the level of the cap every two months, with the first review occurring in mid-January.
"This assessment should consider... the effectiveness of the measure, its execution, international adherence and alignment, the potential impact on coalition members and partners, and market changes," said the European Commission.
The crude oil ceiling will be followed on February 5 by a similar action impacting Russian petroleum products, although the quantity of this cap has not yet been established.
Russia stated on Monday that a Western price restriction on its oil would upset global energy markets but would have no impact on its ability to sustain its "special military operation" in Ukraine.
Dmitry Peskov, a spokesperson for the Kremlin, stated that Russia was preparing a response to the G7 and its allies' move on Friday, which aimed to reduce Moscow's energy revenues and its ability to wage war.
Peskov told reporters that Russia and the Russian economy can fully meet the needs and conditions of the special military operation when asked if the move will harm Moscow's military endeavor.
He stated that it was "clear and undeniable" that the acceptance of these choices will destabilize the global energy markets.
On Monday, the EU will prohibit imports of Russian crude by sea.
Several Russian officials have stated in the past that Moscow will not export oil to countries that adhere to the limit.
Former Russian president Dmitry Medvedev, who is currently the vice chairman of Putin's Security Council, stated on Telegram that the squeeze on Russian oil will result in an "unimaginable" increase in global prices.
As a result of waging "an unequal struggle with the Russian bear and General Frost," he predicted that the West would ice over this winter.
About the winter cold, he remarked, "What is good for a Russian is death for a German." "One thing is certain — there will be no positive outcomes for customers. Therefore, they should stock up on schnapps, blankets, and water heaters."