Russia has ramped up efforts to create its own national oil pricing benchmark as part of its response to Western efforts to limit its oil revenues, Bloomberg reported, citing government and industry sources.
According to the agency, the Western sanctions campaign, which was launched after Russia began its military operation in Ukraine, and the attempts to squeeze its oil export revenue with a proposed price cap, have reinvigorated the idea.
US Treasury secretary Janet Yellen is attempting to set an upper limit on how much Moscow can charge for its crude exports. Some experts have warned that the scheme may backfire.
The Russian government wants to have a pricing benchmark in action sometime between March and July of 2023, the business news outlet reported.
Discussions about the plan are in the early stages, but were confirmed by an executive in the energy industry, the report said.
The country has tried for years to launch a national benchmark based on crude trade at the St. Petersburg International Mercantile Exchange, but the volume of foreign deals made on the exchange has not been high enough for this purpose.
The US and its allies are seeking to damage Russian crude trade with nations like China and India, which refused to join the sanctions drive, by leveraging their dominance in the areas of insurance and finance.
According to the plan, tankers carrying Russian oil would be denied these types of services if the price of the product is higher than what Western nations allow.
The cap would apparently be at a level that would allow trade to be somewhat profitable for Russia, but far below what it currently earns. Western nations hope that buyers of Russian crude will agree to the plan out of self-interest.
Global oil prices have surged due to supply chain disruptions and uncertainty resulting from the sanctions imposed on Russia, allowing Moscow to receive large profits despite reportedly offering big discounts to customers.
The proposed cap “will give Russia a way to continue exporting oil at a price I expect would be quite profitable for them relative to shutting it in,” Yellen said on Thursday.
Moscow has indicated that it will not trade at discriminatory terms, and has said the US-led plan would likely backfire by further driving up prices.