KYIV: A price cap on Russian seaborne oil, imposed by the Group of Seven (G7), went into effect on Monday as part of a Western effort to limit Moscow's ability to finance the Ukrainian war, even if that meant cutting production.
The G7 countries and Australia agreed on Friday to a $60 per barrel price cap on Russian seaborne crude oil after European Union members overcame Poland's resistance. Russia is the world's second-largest exporter of oil.
Ukrainian President Volodymyr Zelenskiy said the world had demonstrated weakness by setting the cap at that level, while Russian Deputy Prime Minister Alexander Novak said on Sunday it was a gross interference that violated free trade rules.
"We are working on mechanisms to prohibit the use of a price cap instrument, regardless of the level set, because such interference could further destabilize the market," said Novak, the Russian government official in charge of the country's oil, gas, atomic energy, and coal sectors.
"We will only sell oil and petroleum products to countries that will cooperate with us under market conditions, even if it means reducing production slightly," he said.
The G7 agreement allows Russian oil to be shipped to third-party countries using G7 and EU tankers, insurance companies, and credit institutions only if the cargo is purchased for $60 per barrel or less.
Industry players and a U.S. official said in October that Russia can access enough tankers to ship most of its oil beyond the reach of the cap, underscoring the limits of the most ambitious plan yet to curb Russia's wartime revenue.
According to Zelenskiy, the $60 cap would do little to deter Russia from waging war in Ukraine. "You wouldn't call it a serious decision to set such a limit for Russian prices, which is quite comfortable for the budget of a terrorist state."
The United States and its allies have imposed sweeping sanctions on Russia since it invaded Ukraine on Feb. 24 and sent billions of dollars in aid to the Ukrainian government.
French President Emmanuel Macron, however, drew criticism from Ukraine and its Baltic allies over the weekend for suggesting the West should consider Russia's need for security guarantees if it agrees to talks to end the war.
Zelenskiy's aide, Mykhailo Podolyak, said the world needed security guarantees from Russia, not the other way around.
Russia has been pounding Ukraine's power grids with sledgehammers since October, leaving millions without heating or running water.
Blackouts are planned for three other regions - Odesa, Donetsk and Dnipropetrovsk in Ukraine's south and east. In Kherson, largely without power since Russian forces abandoned the southern city last month, the regional governor said 85% of customers had electricity.
Ukraine's military says Russian troops are pressing for improved tactical positions to advance on the town of Bakhmut and on Avdiivka, just inside Ukrainian-controlled territory. Russia's defence ministry says its troops are conducting successful operations in the area.
Fighting in Ukraine is running at a "reduced tempo" and both sides are looking to refit and resupply for a counter-offensive after the winter, U.S. intelligence chief says.