On Tuesday, President Vladimir Putin signed a decree that forbids the supply of crude oil and oil products beginning on February 1 for a period of five months to countries who adhere to the restriction.
This was Russia’s long-awaited reaction to a Western pricing cap.
The cap is reasonably near to the price at which Russian oil is now being sold, but it is far lower than the windfall price at which Russia was able to sell its oil this year, which helped Moscow avoid the effects of financial sanctions.
After Saudi Arabia, Russia is the second-largest oil exporter in the world, and a significant decline in its output would have a significant impact on the world’s energy supplies.
The decree was announced as a direct response to “actions that are unfriendly and contradictory to international law by the United States and foreign states and international organisations joining them” and was posted on a government portal and the Kremlin website.
The price cap, which was unheard of even during the Cold War between the West and the Soviet Union, is intended to harm both the Russian government’s finances and Moscow’s military operations in Ukraine.
READ: North Korean drone enters Seoul as tensions escalate
According to some analysts, the cap won’t significantly affect Moscow’s present oil profits in the short term.
The oil price cap, which is reducing export income and creating an additional financial challenge for Moscow as it spends lavishly on its military campaign in Ukraine, might cause Russia’s budget deficit to exceed the anticipated 2% of GDP in 2023, according to Finance Minister Anton Siluanov.
For weeks, Russia promised a formal response, and the final regulation mainly confirmed what officials had already said in public.