The Western powers led by the United States are preparing new sanctions against Russia’s petroleum exports, including price caps on refined products for the first time, according to reports in US media on Wednesday.
According to the reports, the sanctions would include two separate price caps: one for high-value products such as diesel fuel and another for low-value products such as fuel oil.
The new price caps are expected to take effect on February 5 - the same day the EU’s ban on importing Russian refined petroleum exports goes into force. Moscow has denounced such caps as anti-market actions and, in some cases, as violations of existing export-import contracts for those products.
This comes after the United States and the European Union imposed a unilateral price cap of $60 per barrel on unrefined, or crude, oil exports from Russia in December. Earlier in 2022, the European Union also imposed a price cap on Russian liquid natural gas exports, prompting the closure of Nord Stream 1 pipeline just weeks before an undersea explosion disabled it.
Moscow has retaliated against price caps by imposing its own ban on exports to nations that impose the caps, beginning on February 1. The ban includes both crude and refined products. Russia is the world’s largest exporter of refined petroleum products and the world’s second-largest exporter of crude oil, after Saudi Arabia.
According to the report, Western officials believe the coming round of sanctions will have a more damaging effect on both Russian export revenues and on global energy prices because refined products require more specialized transportation than crude oil, meaning . In addition, major buyers of Russian crude oil who have ignored US sanctions and price caps, such as China and India, tend to then refine it themselves, meaning they might not be able to buy up all the market excess produced by the sanctions.
There are also a smaller number of vessels capable of transporting such cargo, making it harder for them to slip around Western authorities.