KYIV: Russia on Saturday rejected a $60 price cap on its oil agreed by the EU, G7 and Australia, which Ukraine said would contribute to the destruction of Russia’s economy.

“We will not accept this price cap,” Kremlin spokesman Dmitry Peskov told domestic news agencies, adding that Russia, the world’s second largest crude exporter, was “analysing” the move.

The $60 oil price cap will come into effect on Monday or soon after, alongside an EU embargo on maritime deliveries of Russian crude oil.

The embargo will prevent seaborne shipments of Russian crude to the European Union, which account for two thirds of the bloc’s oil imports, potentially depriving Russia’s war chest of billions of euros.

Kyiv welcomed the price cap, which stops countries paying more than $60 a barrel for Russian oil deliveries by tanker vessel and is designed to make it harder for Russia to bypass EU sanctions by selling beyond the European Union at market prices.

“We always achieve our goal and the economy of Russia will be destroyed, and Russia itself will pay and be responsible for all crimes,” Ukraine’s presidential chief of staff Andriy Yermak said on Saturday.

The Kremlin also said Russian President Vladimir Putin would “in due time” visit the Donbas region of eastern Ukraine, which he claims to have annexed.

But Peskov gave no indication of when this could happen.

Limit funds for the ‘war machine’

Poland had earlier refused to back the price cap over concerns the $60 ceiling was too high but confirmed its agreement on Friday evening.

Yermak noted a cap of “$30 would have destroyed it (the Russian economy) more quickly”.

The market price of a barrel of Russian Urals crude is currently around $65, just slightly higher than the $60 cap, indicating the measure may have only a limited impact in the short term.

The G7 said it was delivering on its vow “to prevent Russia from profiting from its war of aggression against Ukraine, to support stability in global energy markets and to minimise negative economic spillovers of Russia’s war of aggression”.

The White House described the cap as “welcome news” that would help limit Putin’s ability to fund the Kremlin’s “war machine”.

Russia has threatened not to deliver to countries that adopted the measure.

The G7 and Australia said they were prepared to adjust the price ceiling if necessary.

Russia has earned 67 billion euros ($71 billion) from the sale of oil to the European Union since the start of the war in February.

Its annual military budget amounts to around 60 billion, noted Phuc-Vinh Nguyen, an energy expert at the Institut Jacques-Delors in Paris.

The EU embargo on seaborne deliveries follows a decision by Germany and Poland to stop taking Russian oil via pipeline by the end of 2022.

In all, more than 90 per cent of Russian deliveries to the European Union will be affected, according to the bloc.

‘Endure’ power cuts

After suffering humiliating defeats during what has become the largest armed conflict in Europe since World War II, Russia began targeting Ukrainian energy infrastructure in October.

The strikes have caused sweeping blackouts, and cut off water supplies and heating to civilians at a time when the temperature in some regions has dropped to minus five degrees Celsius (41 degrees Farenheit).

The authorities have introduced scheduled power cuts several times a day to keep essential infrastructure working.

On Saturday, the governor of the southern region of Mykolaiv, Vitaly Kim, urged citizens to “endure” the electricity shortages.

Published in Dawn, December 4th, 2022