BAKU, Azerbaijan, July 7. Global price cap on the purchase of Russian oil may trigger retaliation, Trend reports with reference to Fitch Solutions.
“Europe had already been reducing its purchases of Russian oil, with the share of Russian crude in its import mix falling from around 70 percent by value in 2012, to 45 percent in 2021. The EU import ban will drive this value substantially lower and force a large-scale re-routing of Russian exports from West to East,” reads the report released by Fitch Solutions.
A number of Asian buyers, notably India, have been increasing their oil trade with Russia, taking advantage of the steep discounts offered on its crude.
“However, Moscow will struggle to replace its European buyers in full, in the face of self-sanctioning at the company level, as well as broader infrastructural and logistical constraints. The G7 is also mulling the imposition of a global price cap on the purchase of Russian oil. However, we do not currently factor this into our forecasts, given that such a cap would be highly challenging to implement and enforce and could see Russia reduce exports in retaliation, driving prices significantly higher,” the report says.
Fitch Solutions expects the impact on Russian oil output to be long-lasting.
“Our core view remains that fighting in Ukraine will continue over H222, before eventually settling into a state of frozen conflict. Even assuming that the conflict is resolved, the EU will likely continue to minimize its trade with Moscow, while sanctions on investment in Russia and technology transfers would likely remain in place for many years to come. Against this backdrop, the country will struggle to either maintain or grow its production, as reflected in our heavily bearish 10-year outlook on its upstream oil and gas sector,” reads the report.
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