Western countries have begun imposing a 60 dollars per barrel price cap and a ban on some types of Russian oil, part of new measures aimed at stepping up pressure against Moscow over its war on Ukraine.
The European Union, along with Australia, Britain, Canada, Japan and the United States, agreed to the price cap on Friday.
The move has prompted a rejection from the Kremlin and also criticism from Ukrainian President Volodymyr Zelensky – whose government wants the cap to be half as high.
The 27-country European bloc also imposed an embargo on Russian oil shipped by sea.
Questions have arisen about just how the Western measures will affect market prices. On Monday, US benchmark crude was trading up 90 cents to 80.88 dollars.
Many other factors, including Covid-19 prevention measures in China that have hampered manufacturing, are also having an impact on demand for crude and thus prices. They are far down from a peak earlier during the war.
“We will only sell oil and oil products to the countries that will work with us on market terms, even if we have to reduce output to some extent,” he said in televised remarks hours before the price cap came into effect.
The Ukrainian government demanded over the weekend a lower price cap, of 30 dollars per barrel – saying that at 60 dollars Russia will still reap annual oil revenues of 100 billion dollars, money that can be used to finance its war machine.
Russia, the world’s second biggest oil producer, relies on the sale of oil and gas to underpin its economy, which has already come under sweeping international sanctions over President Vladimir Putin’s war in Ukraine.
In recent weeks, Russia has been pounding Ukrainian infrastructure – including power plants – with military strikes and keeping an offensive going in the east, notably in and around the town of Bakhmut.
Russian forces have also been digging in near the southern city of Kherson, which was recaptured by Ukrainian forces last month after an eight-month occupation.
The war that began with Russia’s invasion of Ukraine on February 24 has displaced millions from their homes, killed and injured an untold number of civilians, and shaken the world economy — notably through the fallout on the prices and availability of foodstuffs, fertiliser and fuel that are key exports from Ukraine and Russia.