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Kremlin rejects EU's $60 price cap on Russian oil

A Kremlin spokesman said Moscow "won't accept the price cap" on Russian oil exports set Friday by the European Union and the G7 nations. File Photo by Hafnia/EPA-EFE
A Kremlin spokesman said Moscow "won't accept the price cap" on Russian oil exports set Friday by the European Union and the G7 nations. File Photo by Hafnia/EPA-EFE

Dec. 3 (UPI) -- The Kremlin on Saturday rejected an agreement by the European Union and other advanced economies placing a $60 per barrel price cap on Russian oil exports.

On Friday EU ambassadors agreed to the price cap, which will apply to Russian oil delivered by sea. The United States and other G7 nations adopted a similar measure.

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The move, meant to apply more Western pressure on Russia over its invasion of Ukraine, is set to come into force on Monday -

Russian reaction was swift and indigent.

RELATED EU agrees on plan to cap Russian seaborne oil prices

"We are assessing the situation," Kremlin spokesperson Dmitry Peskov told reporters in Moscow. "Certain preparations for such a cap were made. We won't accept the price cap and we will inform you how the work will be organized once the assessment is over."

The measure was agreed to by the 27 EU states as well the United States, Canada, France, Germany, Italy, Japan, Britain and Australia.

"The price cap policy is intended to maintain the supply of Russian oil to the global market while reducing the revenues the Russian Federation earns from its oil sales, particularly in light of elevated prices caused by Russia's war of choice," the U.S. Treasury Department said in a statement.

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Once the price cap is in place, any importer of Russian oil that pays a price above the cap will have to do so using services exclusively from companies outside the EU and G7, which represent only a fraction of the market and are often more expensive and less reliable.

Russia could respond by selling at or below the price cap, thus keeping its oil flowing onto global markets at lower prices for importers and with the benefit of best-in-class G7 services. Alternatively, Moscow could opt to sell above the cap and be forced to rely on the few non-G7 service providers available to it.

The Kremlin's remaining option of reducing its sales volume would not be in its economic interest, especially because doing so would mean reducing sales to it allies in emerging markets.

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Ukrainian President Volodymyr Zelensky, meanwhile, criticized a price cap as "weak."

"Russia has already caused huge losses to all countries of the world by deliberately destabilizing the energy market," he said Saturday in his nightly address, adding that it is "only a matter of time when stronger tools will have to be used."

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