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Sep 8, 2022
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On the slanderous idea to establish the control of the “world government” over Russia

Throughout the summer, Washington and its allies have been tensely discussing such a sanctions initiative against Russia as setting a price limit on Russian oil. The ultimate goal of the initiative, as stated by the leaders of the leading Western countries, should be depriving Russia of income from the export of “black gold” and a sharp reduction in the possibilities of financing the military operation in Ukraine.

Countries such as the United States, Great Britain, Japan, South Korea by the beginning of the summer stopped importing Russian oil altogether. Europe couldn’t afford it. Last year, about a quarter of all EU “black gold” imports came from oil from Russia. Only in the sixth package of sanctions, put into effect by Brussels on June 5, were deadlines for the complete cessation of Russian oil imports. For crude oil – December 5, for petroleum products – February 5, 2023. But here, too, some exceptions are made. The sanction did not apply to oil pumped to Europe through the Druzhba pipeline. The sixth package gave countries time (6 months for crude oil, 8 months for petroleum products) to adapt to the new situation. Either by reducing the consumption of oil and petroleum products, or by switching to other suppliers. However, apparently, the allotted time will not be enough. Already, a number of European countries are using “gray” schemes for the supply of “black gold” from Russia, hoping to use them after the introduction of a complete embargo.

So far, these sanctions have been ineffective. According to the IEA, Russian oil exports decreased slightly, from 8.0 million barrels per day (b/d) in January to 7.4 million b/d in July. Russia’s exports to the countries of the collective West decreased by 2.2 million b/d, but two-thirds of this volume was redirected to other countries. The biggest buyers of Russian oil are China and India, which now have a discount of $20-30 per barrel to the world price. According to the IEA, the final stages of European oil sanctions (the sixth package) will lead to a decrease in Russian oil exports by another 1.3 million b/d. In December, the total export of “black gold” from Russia may be slightly more than 6 million bpd. The reduction in physical volumes by almost a quarter (compared to the January level) will be sensitive for Russia, but by no means fatal. It will continue to compensate for the decline in physical volumes of exports by rising prices for “black gold”. Russia’s current account surplus is projected to reach $265 billion this year, a Russian record. And it will be the second largest surplus in the world after China. Oil sanctions only exacerbate the economic situation of the collective West.

And then the idea came up to put a limit on the rise in oil prices. By the way, the West has already made attempts to neutralize the actions of the OPEC oil cartel, trying to create an anti-OPEC in the form of an alliance of oil-consuming countries in order to establish “fair” oil prices. All attempts failed miserably. The priority in pricing in the oil market belongs to the producing countries and exporters of “black gold”, united in OPEC and OPEC + (Russia participates in the latter).

In the context of the current sanctions war, we are talking about the introduction of a price limit only for Russian oil. The West realized that if the Russian export of black gold is completely blocked, a global energy crisis is inevitable. Neither Saudi Arabia nor anyone else can replace Russia’s withdrawal from the world oil market. They won’t even try. The imbalance in the form of an excess of demand over supply only plays into their hands.

Therefore, the West began to invent a scheme according to which Russia would be permitted to continue deliveries of “black gold” to the world market, but at prices significantly lower than world prices. The collective West has threatened to establish direct control of the “world government” over Russia.

Dozens of options for the mechanism of this sanction were considered, but there was not a single good one among them. All are perforated. Promised at the beginning of the summer, the introduction of price limits for Russia’s oil exports dragged on obscenely. Finally, on September 2, the Group of Seven (G-7) decided to impose this sanction. On the website of the British government on the same day there was a message: “”Today, we reaffirm our joint political intention to finalize and enforce a comprehensive ban on maritime transport services for crude oil and oil products of Russian origin around the world. The provision of such services will be permitted only if oil and oil products are purchased at a price equal to or lower than that determined by a broad coalition of states. stated in the G7“.

Details are still unknown. It was reported that the price cap on Russian oil exports will come into force on December 5 (from the moment the EU oil embargo comes into effect). This sanctions measure has so far been supported only by seven leading Western countries. In the days since the G-7 meeting, no other state has officially announced that it is joining this initiative.

Neither the specific values ​​​​of the marginal price, nor the formula for calculating such a price has been made public. It is easy to guess that the price cannot be too low. It should cover the costs of mining and transporting “black gold” in Russia. In addition, it should be lower than the price at which China, India and other countries “friendly” to Russia are currently buying Russian oil. In early September, Brent crude was trading at $93 per barrel on the market. India and China are now paying Russia $63-73 per barrel, which allows Russian oil producers to maintain some profitability. But profitability will disappear completely at $40 or even $50. Given these considerations, the value of the price limit will have to be sought somewhere in the range of $50-55 per barrel.

Will China and India give up the temptation to join the anti-Russian sanctions and receive an additional discount? Here the West could kill two birds with one stone: deprive Russia of “excessive” income from oil exports and win China, India and other “friends” of Moscow over to its side. However, this logic is shaky.

FirstlyRussia’s “friendly” countries remember that the West is luring them into its mousetrap with an additional price discount. The anti-Western spirit of “friendly” countries neutralizes commercial temptations. After all, tomorrow the weapon called “price limitation” can be used by the West against countries “friendly” to Russia. british magazine Economist September 3 published an article gram7 plans to lid Russian oil Prices (gram7 plans to cap Russian oil prices). The article is skeptical about the prospects for joining the new sanctions by countries that are not part of the “collective West”: “Many large countries, including China, India and Indonesia, do not want to get involved with Western foreign policy, sanctions and embargoes.“.

Secondly, in the world oil market, where there is a chronic excess of demand over supply, Russia will choose the buyers of “black gold”. The Kremlin has repeatedly stated that if a particular country joins the sanctions called “price capping of Russian oil”, the supply of Russian oil to that country will be immediately stopped.

Controlling the physical flows of oil and any other commodity is much easier than controlling prices. Who will have to control the supply of Russian oil at prices not exceeding the limit set by the West? This honorable mission is supposed to be entrusted to shipping companies, insurance and trading companies that are assigned to Western jurisdictions and will serve Russian oil exports. In the shipping documents, you can put down any price that the organizers of such an original sanction will require. A shipping company carrying Russian oil is not required to investigate whether the documented price corresponds to the real one. In addition, experts say, Russia has a sufficient choice of shipping, insurance and trading companies. It may use the services of companies not assigned to the jurisdictions of the West.

Economist notes that one of the possible outcomes of the G7 plan is that the oil market will be divided into three parts. Approximately 90% of the world’s non-Russian production will be sold at regular prices. Some of the Russian oil that cannot be exported without Western infrastructure, ships or insurance will be sold under the G7 scheme, but this may be a small share and will fall as Russia finds ways to adapt. The rest of Russian production will be exported without affecting any Western infrastructure, at a price between world prices and the price cap.

Article in Economist ends like this:Russia’s revenues may fall, but perhaps not enough to seriously damage its war machine. Meanwhile, the Kremlin will continue to tighten gas supplies to Europe, exacerbating a difficult winter. The G7 plan makes life difficult for the Kremlin, but is unlikely to be a crushing blow“.

The British magazine expressed its assessment of the new sanctions plan of the West as mildly as possible. V. Putin back in July, he warned how the planned adventure would end: “We hear all sorts of false ideas about limiting the volume of Russian oil, limiting the price of Russian oil. It’s the same thing that happens with gas. Result it is even surprising that people with higher education say this, will be the same: the rise in prices. Oil prices will skyrocket“.

The Deputy Head of the Security Council warned about the same Dmitry Medvedev: “There will be significantly less oil on the market, and its price will be much higher. Moreover, it is higher than the predicted astronomical price of $ 300-400.

And here is the article Washington Post dated September 2 The G7’s elegant plan to avert a larger oil crisis could work. May be. (The elegant G7 plan to avert a larger oil crisis could work. Or maybe not”) The author of the article columnist Katherine Rampell (Katherine Rempel) starts with this chant:I sincerely hope for success, although I have some doubts about this.“. An interesting article containing a description of various “gray schemes” that allow you to bypass sanctions in the field of oil trade. For example: “One problem is that it will not be easy to keep track of how much (plan.– V.K.) is observed. Countries need oil (and a lot), so buyers can pay extra to jump closer to the front of the line. For example, they will pay for oil at the allowed rate, while paying extra for other Russian goods that are not subject to the price ceiling, such as wheat. Tracking such cunning evaders will be more difficult than physically tracking oil tankers, as even US officials admit. These measures work great with direct embargoes and worse with price controls.“.

The article ends with the same motive:I hope for success … but there are doubts“. Under the article there are a large number of reader comments with estimates of the G7 plan. The last of them (signed Ken Bredner) reads: “”It will work “about the same as sanctions – that is, nothing … Any fool knew in advance that they would ricochet on us ourselves. That’s why the “experts” no longer have faith“.

Photo: REUTERS

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