Deputy Head of the US State Department Nuland: oil from Russia is needed on world markets According to Nuland, if the oil price ceiling is set correctly, Russia will not be able to receive enough funds to feed the hostilities, but will be interested in selling oil on the global market
Russian-made oil must be present on global markets, otherwise fuel prices will rise again, and this is not in the interests of the United States, said United States Deputy Secretary of State Victoria Nuland at a discussion platform organized by the Aspen Institute. The broadcast was conducted on YouTube.
Nuland noted that if the supply of Russian-made oil is completely banned, Moscow can get an increase in prices for the goods it exports and earn on its sale to other countries— to India or China. She called the solution to this problem the ceiling of oil prices, which does not allow selling it at a price higher than the established one.
“In this way, the Russians will receive a tiny part of the profits that will pay for their presence in the market,” — Nuland emphasized, noting that for “feeding” these funds will not be enough in combat operations.
The Deputy Secretary of State noted that the sale of oil is one of the resources for Russia to sponsor its military force, she named gas supplies as another obvious source. Now all over the world efforts are being made to diversify supplies, the “other pillar” of this trend is the desire to bring Iranian oil back to the market right now, she added.
A price ceiling for oil from Russia is being discussed among Western countries as part of international sanctions. The American Treasury called for the creation of a special cartel that would help reduce Russia's oil profits and at the same time not create “too much” burden on the global economy.
At the end of June, the G7 countries agreed to find a way to limit the transportation of Russian oil if it is sold at a price above the limit, which “will be agreed upon after consultations with international partners.” Japanese Premier Fumio Kishida clarified: “We will set the upper threshold at about half the current price and create a mechanism by which it will not be possible to buy more expensive.”
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Western countries are planning to put the new norm into effect by the end of the year. “Our goal is that by December, when the ban on insurance [carrying oil tankers] goes into effect, we can add a price ceiling to that,” said Deputy Secretary of the Treasury Adewale Adeyemo.
The Russian government warned that Moscow would not trade oil at a loss. “If these prices that are spoken of are below the cost of producing oil, <…> Naturally, Russia will not ensure the supply of this oil to world markets,” — noted Deputy Prime Minister Alexander Novak. President Vladimir Putin considered that in this way the Western countries are stepping on “the same rake” as with gas, calling the price cap initiative “fake”. “Result” it's even surprising that people with higher education say this, & mdash; will be the same: the rise in prices. Oil prices will skyrocket,— sure he is.
An oil price ceiling mechanism could be established through transportation and insurance restrictions: only oil whose price has not exceeded the established threshold will be allowed to be transported and insured, sources told Bloomberg, noting that an acceptable range of $40 & ndash;60 per barrel is being discussed.
If Russia cuts oil production in response to price caps, this would push the cost of a barrel up to $380, analysts at JPMorgan Chase said. They considered that official Moscow could cut production by 5 million barrels. per day, but the Russian economy will not suffer to a large extent.
On July 22, the Bank of Russia raised its forecast for the price of Urals oil this year from $75 to $80 per barrel. The outlook for 2023 has also been upgraded— from $65 to $70 per barrel. For 2024, the forecast indicators also increased— from $55 to $60 per barrel.
According to Rosstat, the contribution of the oil and gas sector to Russian GDP in the first quarter of 2022 reached a record 21.7% since 2017 (the entire available period of statistics).
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