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Russia could ban oil sales, set maximum discount in response to cap

file photo: a russian state flag flies on the top of a diesel plant in the irkutsk oil company owned yarakta oil field in irkutsk region
File photo: A diesel plant in the Yarakta Oil Field REUTERS/Vasily Fedosenko

Russia is considering three options, including banning oil sales to some countries and setting maximum discounts at which it would sell its crude, to counter the price cap imposed by Western powers, the Vedomosti daily reported on Wednesday.

The $60-per-barrel price cap, set by the G7 nations, the European Union and Australia, came into force on Monday as they try to limit Russia’s ability to finance its war in Ukraine.

In response, the Kremlin and the Russian government are considering banning oil sales to all countries that supported the restriction, the business daily Vedomosti reported, citing two unidentified sources close to the government.

That option would also ban sales through intermediaries, not only directly from Russia. The second option being considered would prohibit exports under contracts that include the price ceiling condition, regardless of which country is the recipient.

The third option would set maximum discounts of Russia’s Urals crude to international benchmarks for sales to be allowed, the daily reported.

Deputy Prime Minister Alexander Novak said on Tuesday that Russia’s response mechanism to the oil price cap would take effect in December. Earlier, he said that Russia may reduce oil production but not by much.

Bloomberg reported that Russia was also considering setting a price floor for its international oil sales.

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