Russia retaliates on Western oil price cap amid conflict

MOSCOW/KYIV — Russia retaliated on Tuesday against a price cap on its oil imposed by Western countries, while its foreign minister warned anew that Ukraine must demilitarize.

Moscow will ban oil sales to countries that abide by the price cap that was imposed on Dec 5, President Vladimir Putin decreed.

The price cap, unseen even in times of the Cold War between the West and the Soviet Union, is aimed at crippling Moscow's military efforts in Ukraine without upsetting markets by actually blocking Russian supply.

Under the cap, oil traders who want to retain access to Western financing for crucial aspects of global shipping such as insurance must promise not to pay above $60 per barrel for Russian seaborne oil.

That is close to the current price for Russian oil, but far below the prices at which Russia was able to sell it for much of the past year, when windfall energy profits helped Moscow offset the impact of financial sanctions.

The decree from Putin, published on a government portal and the Kremlin website, was presented as a direct response to "actions that are unfriendly and contradictory to international law by the United States and foreign states and international organizations joining them".

The Kremlin ban would halt crude oil sales to countries participating in the price cap from Feb 1 to July 1, 2023. A separate ban on refined oil products such as gasoline and diesel would take effect on a date to be set by the government. Putin would have authority to overrule the measures in special cases.

Russia is the world's second largest oil exporter after Saudi Arabia.

Kremlin spokesman Dmitry Peskov said on Wednesday that Russia did not consult with OPEC+ on its response to the Western price cap, stating that it was Russia's sovereign right to respond as it sees fit to such illegal measures.

Air raid alerts

On the battlefield, Ukraine's military said Russian forces stepped up offensives on the city of Kherson on Wednesday. Heavy fighting also persisted around the city of Bakhmut in the region of Donetsk.

Air raid sirens also sounded across Ukraine on Wednesday morning, officials said.

In the latest setback for Russia's military, a suspected Ukrainian drone reached the main base for Russia's long-range strategic bomber fleet, hundreds of kilometers inside Russian airspace, on Monday. Moscow said it had shot the drone down, but added at least three servicemen were killed, Reuters reported.

There is still no prospect of talks to end the conflict, now in its 11th month. Putin has repeatedly spoken of a desire for peace talks in comments in recent days. But Kyiv said it will never agree to relinquish land.

Russian Foreign Minister Sergey Lavrov made it clear on Tuesday that Moscow still has a list of preconditions, saying the West was feeding the conflict to weaken Russia, and it depends on Kyiv and Washington on how long the conflict will last.

"As for the duration of the conflict, the ball is on the side of the (Kyiv) regime and Washington that stands behind its back," Lavrov told the state TASS news agency. "They may stop senseless resistance at any moment."

In an address on Tuesday, Ukrainian President Volodymyr Zelensky said a meeting of the military command had "established the steps to be taken in the near future".

Agencies - Xinhua