(Bloomberg) -- Russia’s initial response to the crude-price cap holds back from any drastic retaliatory measures that could further disrupt global oil supplies.
A presidential decree due in the coming days won’t include a price floor for crude sales that was being considered last week, people with knowledge of the matter said on condition of anonymity as the document is still being finalized in the Kremlin. It won’t ban specific countries from buying Russian oil, but will prohibit sales through any contract that mentions a price cap, the people said.
That final condition may not have much impact on oil shipments, because there is no requirement for buyers to include such a reference under the terms of the price-cap agreement. The market price for Russia’s Urals crude is currently well below the $60-a-barrel threshold set by the European Union and G-7, meaning most trade can proceed regardless of the restriction.
The price limit imposed on Russian crude by the EU and G-7 will be revised every two months with the aim of curbing the revenue Moscow is using to fund its attack on Ukraine. Russia will monitor the oil market in the first quarter to see the impact of the price cap before deciding whether to take any further retaliatory measures, such as a price floor, the people said.
Oil prices plunged last week after it became clear that Western powers were going to set the price cap high enough that it wouldn’t become a significant impediment to Russian crude sales. Moscow’s response to the measure is less robust than previous comments from Russian political leaders had suggested.
President Vladimir Putin said last week that his country “simply won’t sell oil to those countries” that join a price cap. He also said Russia could potentially react by cutting production.
Most nations participating in the price cap have already banned seaborne imports of Russian crude. Some nations including Germany, Poland, Hungary, the Czech Republic and Slovakia could potentially continue to receive pipeline supplies, which are exempt from the price cap and the bloc’s ban on Russian oil imports.
On Friday Putin promised that his decree would be announced in the next several days. While the document will set the framework of Russia’s response, further details will be worked out by the government, Vedomosti reported earlier this week.
Those additional government bylaws also won’t specify a price floor for now, according to one person.
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