Russia wants to create its own reference price for oil
- July 18, 2022
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Top Russian ministries, domestic oil producers and the central bank plan to launch an oil trading platform in October, according to a document seen by Bloomberg News.
O russian government drew up a plan to create its own reference price for the Petroleum in an attempt to circumvent efforts by the US and its allies to restrict the flow of petrodollars that finance the invasion of Ukraine.
Top Russian ministries, domestic oil producers and the central bank plan to launch an oil trading platform in October, according to a document seen by Bloomberg News. The country will seek to attract foreign partners to buy oil through the new market, with the aim of achieving sufficient trading volumes to establish a price benchmark between March and July 2023, according to the plan.
Russia had already been trying to create its own oil benchmark for more than a decade, with little success. Some of the country’s producers have been selling batches of oil for export on the Spimex commodity exchange in Moscow, but trading volumes have not been high enough to set a globally accepted benchmark.
The country’s ambitions intensified after the invasion of Ukraine sparked a series of Western oil sanctions. Last month, the G7 nations agreed to urgently explore how to reduce Moscow’s oil revenue by capping the price.
The main Russian export oil, known as Urals, is normally bought and sold at a price expressed as a discount to Brent, the world’s benchmark oil. Since the invasion, that discount has increased significantly as sanctions have reduced the appeal of Russian barrels. However, the broader rally in global prices meant that the flow of petrodollars into Kremlin coffers continued unabated.
Two Russian officials, who spoke on condition of anonymity, confirmed that work was underway to create a national price benchmark and that the country was seeking to ensure that it could sell its oil without any external pressure or restrictions. The G7 proposal only further proved the need for an independent Russian benchmark, one official said.
An executive at a Russian oil producer, who also spoke on condition of anonymity, confirmed that there had been discussions about a benchmark.
The proposal is still at an early stage and government bodies have yet to determine whether the country needs additional legal frameworks for trading oil on the platform, according to the document.
Russia’s energy ministry did not immediately respond to a request for comment from Bloomberg.