The US Department of the Treasury issued clarifications regarding the implementation of the mechanism for limiting prices for Russian oil. It follows from them that the implementation of the mechanism will be softer than expected by many market participants. According to the clarifications of the US authorities, the proposed sanctions regime will not apply to all ships with Russian oil that were loaded before December 5 and will be unloaded before January 19. Clarification on the operation of the mechanism leads The Wall Street Journal.
The decision will greatly simplify the lives of industries serving maritime transportation – banks, insurers and transport companies, who feared that those oil shipments that were shipped before December 5, but would reach their destination after that date, could be subject to restrictions. This time gap has now been closed.
For market participants, such an explanation is extremely important, since some consignments of oil can go to buyers from 45 to 60 days. The explanation from the US Treasury reassured all market participants, who can now calculate the risks on their own in accordance with the new introductory ones. The Ministry of Finance assured that all companies that meet the deadlines will be able to avoid sanctions.
The capping mechanism for Russian oil aims to reduce Moscow's energy revenues, which continue to help the Russian authorities fight the war in Ukraine. Western countries, led by the G7 countries, expect to hit the Russian economy in this way, but at the same time not lead to critical consequences for the entire energy market. The US has previously softened the terms of the price ceiling, the ceiling price range will be set above $60 per barrel.
The Russian side has repeatedly stated that it will not supply oil to those countries that join the price ceiling. The largest buyers of Russian oil – China, India and Turkey – will definitely not join Western sanctions. However, the very fact of introducing such restrictions strengthens the negotiating position of Russia's partners, for whom it becomes much easier to get a significant discount for themselves. The average discount for a barrel of Russian oil since the beginning of the war was $20. The reduction in the supply of Russian oil to world markets has already significantly reduced budget revenues from oil.