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‘It is contrary to all terms and conditions related to global free trade’
DESPERATION is the only word available to explain the proposal presented by the G7 countries to set a price cap on Russian oil exports. They suddenly want to set their own policies for controlling the prices of commodities in another country. So what happens to global free trade, and anti-monopoly policies? Why would Russia agree to sell or export oil to Europe under G7’s terms and conditions? Who in the world would accept such conditions, knowing well that Russia can always export oils to other parts of the world? Failing to do so would simply reduce their throughput and put more pressure on the oil prices.
It is a known fact that OPEC+ cannot meet the demand or replace Russian oils. Of course, Russia will enjoy free movements with open bank accounts and marine oil movements without restrictions. However, it will refuse any conditions imposed on dealing and trading with its own oil and gas. How can G7 think of such a price cap on a sovereign country with its own legitimate resources?
The finance ministers of the US, UK, France, Germany, Italy, Canada, and Japan will give their political support for such restrictions. However, we have to bear in mind that three countries other than Germany, France and Italy are less dependent on Russian energy, to a lesser extent than the UK if any. Let us assume that Russia agrees to the price cap and sells its oils at discounted levels.
What is the assurance that the same European countries won’t sell the same Russian oil at higher prices, taking advantage of the Russian rebate? To deprive Russia from its oil revenues will be difficult, if not impossible. It will simply reduce its crude oil production and enjoy higher revenues with smaller throughput volume, knowing that OPEC+ cannot increase its production.
It is unfortunate that it is already short of its own monthly quota production. A price cap is impossible to apply and implement. It is contrary to all terms and conditions related to global free trade. It is in fact a dangerous move and can certainly be deemed as an act of desperation.
By Kamel Al-Harami
Independent Oil Analyst