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The Kremlin does not and will not recognize any price cap on its oil, Kremlin spokesman Dmitry Peskov said on Tuesday after the U.S. said the Western price cap was working well.
“We do not and will not recognize any cap,” Peskov told reporters in Moscow as carried by Russian news agency Interfax.
Russia has taken its own measures in response to the price cap and is working to ensure that the mechanism doesn’t harm its interests, Putin’s spokesman said.
On Monday, U.S. Energy Envoy Amos Hochstein said that the price cap on Russia’s crude oil and oil products was working well.
“I think the beauty of the process is that it is working and that Russian oil and Russian products are being traded below the price cap,” Hochstein said on the sidelines of the CERAWeek energy conference in Houston, as carried by Reuters.
Russian crude is still flowing to the global markets, but buyers are paying much lower prices for it, which shrinks Putin’s revenues from oil exports, the mainstay of his budget. That’s essentially the dual purpose of the price cap on crude as intended by the U.S. Administration—keep the oil market well supplied and reduce revenues for Russia.
Russia’s oil production and exports have been resilient so far, defying early expectations of a plunge in supply after the West agreed to impose sanctions on Russian oil to cut Putin’s revenues from energy sales. But Russia’s budget revenues are sinking due to the low prices of its flagship Urals blend, whose discount to Brent Crude has widened to $30 per barrel.
Due to the low price of Urals in January, Russia’s budget was $24.7 billion (1.76 trillion rubles) into deficit in January, compared to a surplus for January 2022, as state revenues from oil and gas plunged by 46.4% due to the low price of Urals and lower natural gas exports, the Russian Finance Ministry said in preliminary estimates earlier this month. Budget revenues from energy sales – including taxes and customs revenues – plummeted last month to the lowest level since August 2020.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.