Source: Global Times
Editor's note: The Finance Ministers of the Group of Seven (G7) issued a joint statement at a meeting on Friday announcing that they had agreed to impose price caps on Russian oil and petroleum products. Shipments of oil and petroleum products are only permitted if their prices are equal to or below the established price cap, the statement said. The purpose of this article is to explore the prospects of Russia's oil price limit program and the possible impact on the international energy market.
Price limit will accelerate Russia's energy "turn east"
The purpose of the United States in targeting the price limit of Russian oil exports is to limit and weaken Russia's energy export earnings, and the second is to curb the rapid rise in global energy prices. But even if the plan were agreed upon, it would not be too effective.
First of all, in the context of sanctions, in order to achieve the price limit on Russian oil exports, it is necessary to get the cooperation of its main buyers. What is obvious is that the price limit on Russian oil exports is actually an expansion and continuation of the sanctions against Russia. However, from the perspective of the game of political and economic interests of all parties, the possibility of the United States coercing the world to achieve these goals is very small. And even within the G7, the United States and Canada, the oil producers, are at odds with the interests of oil-consuming countries Britain, France, Germany, and Japan.
Second, even if the United States succeeds in building a price-limit coalition against Russian oil exports, Russia will certainly retaliate. Since the Western buyers of Russian oil currently account for the majority, it will be the next possible move for Russia to reconstruct the Russian oil market with the help of those energy consuming powers that have not participated in the sanctions against Russia, such as China, India, Turkey, etc., so as to realize the "strategic eastward turn" of Russian energy.
Combined with various factors, it is predicted that in the short term, this "strategic eastward turn" will inevitably bring pressure on Russia's infrastructure and cultivate new markets, and also bring pressure on the European energy market. In the long run, Russia from the perspective of economic autonomy, market autonomy, and technological autonomy, this is also a choice that has to be made. For the mainland, in the early stage of the actual effect of the price limit plan, it may have some adverse effects on the mainland's macro energy stability, as a major energy consumer, the uncertainty brought about by the rise and fluctuation of energy prices in the international market is an important economic and security risk. However, in the long run, Russia after the "strategic eastward turn" of the energy market will rely more on the Asian market, which is conducive to the mainland's energy supply and energy security to a certain extent. (The writer is director of the Russian Economics Office of the Institute of Russian Eastern European and Central Asian Studies, Chinese Academy of Social Sciences)
The United States has taken the opportunity to bundle the global energy market
The main means of limiting the price of U.S. energy exports to Russia is to exert the dominance of the United States and the West in the global financial market, but the United States is actually well aware that the initiative, like the economic sanctions against Russia, is unlikely to receive broad support from the international community. However, in this case, it is still determined to advance, and the US side mainly considers the following four points:
The first is the factor of midterm elections. Inflation remains the number one challenge facing the U.S. economy and is a key factor influencing the midterm elections. U.S. President Joe Biden must effectively depress domestic gasoline and diesel prices by lowering international energy prices to address inflation. However, U.S. energy companies are more keen to export gasoline and diesel to the outside world to obtain huge profits, according to statistics, the United States recently exported more than 11 million barrels of refined oil products per day, setting a record. Biden's high-profile pursuit of a price limit on Russian oil can send a double signal even if it does not succeed. First, show the public that the Biden administration has been working to lower energy prices; Second, convey price pressure and policy risks to the market to avoid a sharp rebound in oil prices in the short term.
The second is to continue to strike at Russia. Due to the rise in international energy prices, with oil exports, Russia has no worries in the Russian-Ukrainian battlefield. For the United States to defeat Russia on the battlefield, it must weaken It financially. Therefore, the US government believes that even if only some countries limit the price of Russian energy exports, it will help reduce Russia's energy export revenues, which will benefit its own strategic interests.
The third is to appease and bind allies. In the Russian-Ukrainian conflict and economic sanctions against Russia, Europe has chosen to support the United States. But Europe is clearly taking a bigger hit on energy prices. Germany and France, in particular, face energy shortages and rising costs. Even more urgent is that winter is coming. To sustain Europe's following of itself, the United States must echo Its concerns.
The fourth is to take the opportunity to expand the global energy influence. The United States is already the world's largest oil producer, surpassing Saudi Arabia and Russia. If the United States can take advantage of the Russian-Ukrainian conflict and limit the price of Russia's foreign energy exports through its political and diplomatic efforts and make it permanent, it will greatly enhance the influence of the United States in the international energy market and deeply brand the United States in the global energy market. (The author is deputy director of the Center for American Studies, Fudan University)
Mainland China should accelerate its energy diversification strategy
Since the Russian-Ukrainian conflict, although Western countries have adopted many rounds of sanctions on Russian oil, the total amount of Russian crude oil exports in 2022 has not decreased but has increased, and the daily export volume once exceeded 5 million barrels, and the original sanctions plan of Western countries seems to be ineffective. The G7 is currently plotting to cap the price of Russian oil, and the sanctions are still unlikely to achieve their goal. However, regardless of the effectiveness of the sanctions, the game of sanctions and counter-sanctions between the United States and Western countries and Russia in the field of energy will undoubtedly have an impact on the international energy market.
In the short term, the intervention of non-market instruments will have a huge impact on the balance of international energy supply and demand and prices, and there is a strong uncertainty about this effect, which is a trend that the market does not like. In addition, price limit measures may force both Russia and the European Union to start looking for new energy partners and lay out new infrastructure, and the international oil and gas supply pattern will change accordingly. In addition, the G7's attempt to force Russia to accept the program by banning financing and insurance for Russian oil shipments could also lead Russia to actively seek new service providers to respond.
It is worth noting that "poor oil and little gas" is the short board of China's energy endowment. Under the game conflict between the Group of Seven and Russia, the supply and demand of international energy will continue to remain unstable, which will greatly cause large fluctuations in oil prices. Obviously, China's energy prices and supply security will be affected by this. For China, ensuring a stable energy supply is the primary issue that needs to be considered in the event of international geopolitical conflicts, so in the autumn of the international energy situation, spending efforts to lay out the diversification strategy of oil and gas imports, as well as complying with the requirements of low-carbon development, and continuing to lay out emerging clean energy technologies, is a feasible solution to deal with the potential energy supply security problems brought about by the high dependence of oil and gas on foreign countries. (The author is a researcher at Jiageng Innovation Lab and dean of China Energy Policy Research Institute of Xiamen University)