Price Cap On Russian Oil Exports 'Neither Viable Nor Enforceable' - Expert

The price cap imposed by the West on Russian crude oil is unlikely to have a major impact on Russia's exports and will only lead to further shortages on the global oil market, Mamdouh Salameh, an international energy economist and visiting professor of energy economics at the ESCP Europe Business School in London, told Sputnik

MOSCOW (UrduPoint News / Sputnik - 13th December, 2022) The price cap imposed by the West on Russian crude oil is unlikely to have a major impact on Russia's exports and will only lead to further shortages on the global oil market, Mamdouh Salameh, an international energy economist and visiting professor of energy economics at the ESCP Europe business school in London, told Sputnik.

The European Union placed a price cap of $60 per barrel on Russian crude oil on December 5. The cap will be reviewed every two months to remain at 5% below the International Energy Agency benchmark. The G7 nations and Australia have also capped Russian oil exports at $60 per barrel.

"The Western price cap on Russian oil exports is neither viable nor enforceable. Therefore, it is doomed to fail miserably. It will only create confusion and add to shortages in the global oil market," the expert said.

Moreover, the cap won't have the desired effect on Russian oil supplies since Moscow is capable of ensuring and insuring its exports without Western assistance, Salameh noted.

"In addition, Russia can supply China, its biggest customer, via oil pipelines connecting both countries and also via the Northern Sea Route from the Russian Arctic to China, cutting shipping time by half," the expert told Sputnik.

Salameh explained that a dip in the price of Russia's Ural grade oil below the $60 price cap on the eve of its introduction could be attributed to uncertainty in the global oil market.

"The fact that crude oil is never sold in the market at fixed prices has caused a lot of confusion for oil traders who neither want to sell their oil contracts at a loss, nor do they want to fall foul of sanctions," he added.

Western countries have been looking for ways to limit Russia's income from oil and gas exports since the country launched its special military operation in Ukraine on February 24. In September, the G7 finance ministers confirmed their intention to impose a price cap on Russian oil and urged all nations to support the initiative.

In October, the European Union introduced the eighth package of sanctions against Moscow, which included a legislative basis for setting a price cap for maritime shipments of Russian refined products starting from February 5, 2023.

Russian Deputy Prime Minister Alexander Novak, commenting on the West's decision to introduce the price cap, said that Moscow would not accept it. Russia is ready to work only with those consumers who comply with market conditions, Novak added.