The West's energy price cap will be its undoing, Russia warns

Country's top legislator expects prices to soar and says the global market is not limited to seven countries

Russia is the world's second-largest oil exporter after Saudi Arabia. AP
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Russia told the West on Friday that plans to try to cap the price of Russia's oil and gas exports in retaliation for the war in Ukraine would fail and ultimately lead to the instability of the US and its allies.

Shortly before the EU announced a price cap on Russian gas on Wednesday, President Vladimir Putin threatened to sever supplies if such limits were imposed, warning the West it would freeze like the wolf's tail in a fairy tale.

The Group of Seven major industrialised countries wants to impose an oil price cap that would deny insurance, finance and brokering to oil cargo priced above a yet to be set price cap on crude and two oil products.

Russia's foreign ministry spokeswoman Maria Zakharova said the West did not understand how such steps would ultimately affect their own country.

“The collective West does not understand: the introduction of a cap on prices for Russian energy resources will lead to a slippery floor under its own feet,” Ms Zakharova said.

Russia's top legislator said on Friday that the West's plans would fail and that prices would soar far beyond their attempted artificial price ceiling.

“What G7 state officials call a price 'ceiling' will become a price floor,” Vyacheslav Volodin, the speaker of Russia's lower house of parliament, the Duma, wrote on his Telegram channel. “The global market is not limited to seven countries.”

The attempt by the West to punish the world's biggest producer of natural resources — ranging from oil and gas to gold, metals, coal and timber — is not an easy task, especially when China, India and other consumers are still happy to continue buying.

Selling oil and gas to Europe has been one of the main sources for Russian foreign currency earnings since Soviet geologists found oil and gas in the swamps of Siberia in the decades after the Second World War.

Russia is the world's second-largest oil exporter after Saudi Arabia, the world's top natural gas exporter. Europe usually imports about 40 per cent of its gas and 30 per cent of its oil from Russia.

Since the war began, EU customers have pledged to reduce their reliance on Russian energy. Moscow has cut or shut down supplies on three of its biggest westward gas pipelines while oil supplies have been redirected eastward.

Mr Putin says that if western consumers want to turn away from Russian energy, then he will send it eastward to major economies such as China and India.

Updated: September 09, 2022, 11:17 AM