The Wall Street Journal reports:

Russia on Tuesday banned the sale of its oil and petroleum products to countries that put a cap on their sales price, in a move that threatened more uncertainty ahead for global energy markets.

The Kremlin’s action is an attempt to undermine a plan by the U.S. and its allies to bar the shipping, financing or insuring of seaborne Russian crude unless it is sold for $60 a barrel or less—a sanction leveled in response to Russia’s invasion of neighboring Ukraine.

A decree signed by Russian President Vladimir Putin on Tuesday said exports would be banned under contracts that “directly or indirectly provide for the use of the price cap mechanism” between Feb. 1 and July 1. The order says Mr. Putin can create exemptions for the sale of oil to countries following the price cap if he wants.

How the Kremlin views oil contracts—and how broadly it provides exemptions—will shape whether it creates a major disruption to global markets. Many of Russia’s crude exports are now selling at market prices well below the $60 cap, primarily to countries like India, China and Turkey that haven’t agreed to join the Western sanctions.

Some of these shipments are proceeding with the help of Western companies in line with the cap’s terms, according to people familiar with them, while others are happening with financing, shipping and insurance from outside the Western countries enforcing sanctions.

If the Kremlin decides to curb oil exports to non-Western buyers, it could reduce global supply and push up prices. If only the Western countries that crafted the price cap are targeted, the impact would be much more muted since they have already banned most Russian imports

“The decree is vague and provides Putin with options to keep exports going to selected countries complying with the cap,” said Simone Tagliapietra, a senior fellow at the Bruegel think tank in Brussels. “All in all, this is a sign that Russia is in a vulnerable situation, needs oil revenues and therefore cannot take drastic retaliation measures.”

While Mr. Putin’s order threatens to disrupt markets, investors appear so far to be shrugging it off. Futures contracts for Brent crude, the global price gauge, edged about 0.5% higher Tuesday to $84.33 a barrel. Russian officials have threatened for weeks to cut off their oil supplies in retaliation for the cap. [Continue reading…]