Russia threatens oil cut off after rejecting Western-set cap

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Russia threatens oil cut off after rejecting Western-set cap

Russia is threatening to stop supplying Western allies of Ukraine with oil after rejecting a proposed price cap of $60 per barrel.

Kremlin spokesman Dmitry Peskov said Saturday that Russia will need more time to formally respond, but that it will not be accepting the price ceiling agreed upon on Friday by the U.S., Japan, Canada, Britain, Australia, and the European Union as a measure to cut Putin’s funding for the war in Ukraine.

Its cap was to take effect on Monday, along with an EU embargo on Russian oil shipped by sea.

Mikhail Ulynov, Russia’s permanent representative to international organizations in Vienna, slammed the agreement by Ukraine’s Western supporters and warned they would regret the decision.

“From this year, Europe will live without Russian oil,” Ulyanov tweeted. “Moscow has already made it clear that it will not supply oil to those countries that support anti-market price caps. Wait, very soon the EU will accuse Russia of using oil as a weapon.”

Ukrainian President Volodymyr Zelensky’s office, meanwhile, called for an even lower price cap, saying the one adopted by the EU and the Group of Seven leading economies didn’t go far enough.

A picture of an oil facility in Russia.
Russia is threatening to stop supplying Western allies of Ukraine with oil after rejecting a proposed price cap.
DPA/picture alliance via Getty Images

On the open market, Brent Crude oil, the type most often used in Europe, closed at $85.42 per barrel, but Russia’s oil has already been selling for around $60 a barrel.

The G7 nations joined Australia and the EU in adopting the price cap on Friday after the agreement was delayed by Poland, which sought to lower the cap further but relented after other countries signaled that they would back out.

“Together, the G7, European Union, and Australia have now jointly set a cap on the price of seaborne Russian oil that will help us achieve our goal of restricting Putin’s primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies,” Treasury Secretary Janet Yellen said in a statement Friday.

A picture of Kremlin spokesman Dmitry Peskov.
Kremlin spokesman Dmitry Peskov Saturday that Russia will not be accepting the price ceiling agreed upon on Friday by Western allies of Ukraine.

A picture of U.S. Treasury Secretary Janet Yellen.
Treasury Secretary Janet Yellen said that the price ceiling would help low- and medium-income countries who already dealing with the effect of the war in Ukraine.

A picture of Russian Ambassador to the International Atomic Energy Agency Mikhail Ulyanov.
Mikhail Ulynov warned Ukraine’s Western supporters that they would regret the decision.

Yellen added that the price ceiling would help low- and medium-income countries who already dealing with inflated energy and food prices worsened by the war in Ukraine.

“Whether these countries purchase energy inside or outside of the cap, the cap will enable them to bargain for steeper discounts on Russian oil and benefit from greater stability in global energy markets,” Yellen said.

If Russia — one of the world’s largest oil producers and a key source of energy for Europe — cuts off fuel supplies from the Western world and its allies, it could cause gas prices to surge worldwide, including in the U.S., where tackling high gas prices have become an ongoing issue for the Biden administration, Bloomberg reported. JPMorgan Chase analysts predicted a barrel could skyrocket to $380 a barrel.

A picture of a crude oil processing plant.
Brent Crude oil, the type most often used in Europe, closed at $85.42 per barrel, but Russia’s oil has already been selling for around $60 a barrel.

A picture of a Russian state-owned company that operates the country's oil.
If Russia cuts off fuel supplies from the Western world and its allies, it could cause gas prices to surge worldwide, including in the U.S.

In October, Biden urged American oil companies to increase production to bring down the costs for buyers.

“You should be using these record-breaking profits to increase production and refining,” Biden said during a speech at the White House on Oct. 19. “Invest in America for the American people. Bring down the price you charge at the pump to reflect what you pay for the product.”

Biden also released 15 million barrels of oil from the Strategic Petroleum Reserve in an attempt to reduce prices.

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