Yellen’s precepts are true – Vedomosti

A week after the introduction of the price ceiling for Russian oil, the government finally discussed draft presidential decree on retaliatory measures. The document is intended to give a tough rebuff to Western ideologists of the restrictions imposed since December 5.

Before analyzing the proposed measures, it is necessary to consider in detail the goals that the American authors assigned to the new concept of interaction with Russia in the oil market. These goals were openly outlined by US Treasury Secretary Janet Yellen. “The first goal is to limit the income that Russia receives. The second goal is <...> that we want Russian oil to continue to enter the market because Moscow is a significant supplier,” she said in an interview with CBS, noting that “oil price ceiling is a new policy.”

In this regard, the level of the established “ceiling” – $60 per barrel – is extremely indicative. From the point of view of the developers of this new ideology, the “ceiling” is painless for both suppliers (the price is set almost at the level of the current cost of Russian oil, taking into account the applied discount) and consumers, since it allows traders the required volumes, bringing the market to a lost equilibrium. In this form, the “ceiling” is aimed at not scaring off the victim, thus avoiding a sharp increase in oil prices, which would be the inevitable consequence of a significant reduction in Russian oil on world markets.

At the same time, restrictions are introduced not only on the supply, but also on transportation services, cargo insurance, etc. In other words, absolutely non-market trading conditions are being created. All this should be seen as a search for a solution to the US retaining its role as a global regulator of the world market.

The discussions that preceded the introduction of the price ceiling, including negotiations with Venezuela and other major energy suppliers, the closure of the European market, once again confirm the words of Janet Yellen that the price ceiling is not a one-time action, but a fundamentally new mechanism for interaction in the world market. The oil industry is obviously intended to become a kind of testing ground for this new tool, which should eventually lead to fundamental changes in world trade, not just to replacing existing rules, but to killing the free market and establishing control over it by a single regulator. The possibility of introducing similar mechanisms to limit prices in the gas market is already being discussed today. The next step could be any other market with inelastic demand: grain, mineral fertilizers, rare earth metals.

Other countries unequivocally considered these signals and feel the threat looming over them, so they are looking forward to Russia’s response with such impatience. A lot depends on the actions of our country now. Therefore, the answer should be clear, balanced and professional.

The proposals, developed in response to the introduction of the price ceiling, imply a ban on oil supplies from Russia if one of the following conditions is met: if the contract for the supply of oil or petroleum products is concluded with one of the states that maintain the price ceiling, or if the supply contract expressly or implicitly contains a provision for the application of oil price ceiling mechanisms. At the same time, the government itself is instructed to develop a procedure for monitoring the provisions of the decree.

The content of the document is likely to be supported by industry lobbyists who took part in the preparation of proposals, both in Russia and abroad. First of all, because these measures do not in any way impede the supply of oil and oil products through established channels with the participation of intermediaries, including through our own trading channels.

The absence in the draft decree of measures to control the end consumer of resources will certainly be supported not only by Russian exporters, but also by our Western opponents, for whom the “price ceiling” is a calculated, controlled value that allows for a controlled income of the Russian budget, on the one hand, and on the other hand, the energy security of any country that wants to purchase unlimited volumes of Russian oil through gray schemes.

The only thing that can cause bewilderment and arouse rumors is a clause that unexpectedly gives the government the right not to apply the ban on the supply of oil established at the beginning of the document. In other words, some paragraphs of the draft decree are aimed at not preventing anyone from working, and the last one says that the attached document may not be published at all, since the government has the right to ignore all the prohibitions established by the decree. And this not only completely disavows the meaning of the restrictions, offering market participants to take advantage of the gate opened by the government, but also, as they say, has a high corruption capacity.

Apparently, the developers of the document still lacked an understanding of the sensitivity of the processes taking place in the energy market and an assessment of the true goals of the established “price ceiling”. The authors of the proposals failed to fully understand the global implications that this mechanism may entail in relation to Russia, in relation to suppliers of natural resources from other countries, and ultimately in relation to the global market as a whole.