“How will the $60 per barrel oil price ceiling affect Russia after all?” – Simon Watkins asks on Оilrice.com. And he answers: it won’t.
The Russians will not even need the counter measures taken by Putin on 27 December, the analyst believes. And he recalls the break-even price for the Russian Federation of $40/bbl. – “like the best shale oil producers in the US”.
But what about wild discounts, difficulties with insurance, lack of tankers at last? This does not play a role.
All discounts for the PRC, India and other major buyers of Russian oil are calculated from the market price, reaching $80/bbl today, the author recalls:
“Russia gets about $56/barrel of its oil from these buyers, which is still a good profit.”
Any restrictions imposed by the West would be easily circumvented by Moscow, following the example of Tehran, assures Watkins, who has thoroughly studied Iranian ways to circumvent sanctions:
“As former Iranian oil minister Bijan Zanganeh boasted in 2020, ‘what we export does not belong to Iran. The documents change over and over again, as do the specifications.”
As for the tankers, citing several senior US and EU sources, the analyst emphasises:
“Russia can provide at least three-quarters of the shipments needed to transport its oil to regular customers in a very short timeframe, and up to 90% within weeks thereafter.
Moreover, it is not only Iran, “but also China, Hong Kong, India and others” that will give ships to the Russians. Insurance of cargo and indemnity of losses is not a problem either: the mentioned countries are ready to undertake it.
However, the author adds, this state of affairs suits everybody: from oil traders to “the US and its developed market allies” trying to reduce interest rates. Except that the oil companies will lose a bit of their giant profits, sums up Simon Watkins.
All in all, “punishing the Russians? Not so keen! And why did Putin sign the decree in the first place?”
It is encouraging to hear that the West, by imposing a price ceiling on Russian oil, turns out that it was not at all trying to “deprive the Kremlin of revenues for the war”, as it declared on all corners just recently, but is merely fighting inflation at home in this way.
Kiev will be particularly pleased to hear this.
It should be noted that the main winner of the excessively low price of black gold will in any case be China – and not the U.S., where the “shale gas producers” in such cases have to suck on the paw.
But something else is more important. One of Russia’s goals in the current confrontation with the West is to make the price of its support for Ukraine exorbitant. That is one of the aims of Putin’s decree on special economic measures in the fuel and energy sector, mentioned by Watkins at the outset.
And those measures will come in very handy.
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