Putin Created Trap For Himself
- 28.12.2022, 13:47
What will the ban on the sale of oil to participants in the price cap mean for Russia?
Vladimir Putin signed a law prohibiting the sale of oil to countries and legal entities whose contracts provide for a ceiling on the price of Russian oil. He gave such a response to anti-Russian sanctions, in fact, having made a voluntary embargo.
However, it was those countries that have declared a ceiling on oil prices that declared an embargo on Russia. In the spring, the United States banned the purchase of not only oil, but also its oil products. UK too. Political scientist Taras Zahorodniy told Channel 24 about this.
According to him, the European Union declared an embargo on the supply of oil in general and introduced it from December 5.
“They don’t buy oil from Russia anyway. Therefore, it is not clear for whom Putin introduced this restriction,” he said.
The political scientist noted that the EU will refuse to buy oil products from the aggressor country in the first quarter of next year.
“Therefore, whether or not Putin signed this law did not decide anything. Moreover, he created another trap for himself,” Zahorodniy emphasized.
In his opinion, China and India, the theoretical buyers of Russian oil, will understand a simple thing. If Russia additionally restricts itself in deliveries to those countries that have set a ceiling on the price, it means that it has excess oil reserves that it will not be able to sell anyway. Then they will demand a discount.
“Moreover, now they are demanding discounts not from $80 or $90, Brent had such a price back in the spring, but from $60,” the political scientist emphasized.
He believes that now Russia will be forced to trade oil close to the cost price. And the cost of Russian oil is relatively high.
“For example, in the countries of the Middle East, oil deposits are not deep in the ground. It is not so difficult to extract, it can be quickly reloaded onto tankers and shipped around the world,” he explained.
According to him, in Russia, oil and gas are produced in hard-to-reach regions. Then it is delivered to the ports. This means that their cost is about 30 - 35 dollars.
“According to various sources, the quotation of this oil, which other buyers, in particular China, are ready to buy, is now about 43-45 dollars. They actually trade on the verge of minimal profitability,” Zahorodniy said.
He noted that with this law, Putin gave China and India the opportunity to demand a big discount.
“They understand the impasse of Russian oilmen, who are forced to trade on the verge of profitability,” the political scientist said.
He suggested that Russia would be forced to reduce the tax burden on oil companies so that they could produce at all. Or reduce the export duty, which is in Russia, and this will strike a blow to its own budget.
“This will need to be done so that oil companies have at least some interest in continuing to operate those wells that they already have,” Taras Zahorodniy explained.