Outcome of West’s Efforts to Cap the Price of Russia’s Oil & Gas Exports

Strategic Council Online - Interview: A university professor, stating that Western countries are trying to prevent Russia from obtaining more financial resources by setting a ceiling on purchase price of energy from Moscow, but such formulas will not work in the short term, said: Changing the tone of Western countries, continuation of their efforts to find an alternative solution or to reach an intermediate agreement with Moscow, shows that their plan to find an alternative to Russian energy has not been carried out according to their wishes.

Dr. Mehdi Fakheri, in an interview with the website of the Strategic Council on Foreign Relations, referred to the efforts of the G20 member countries to determine the price ceiling for the purchase of oil from Russia and the G20 members’ emphasis on the need for the attention of China and India to this demand and for creation of more restrictions for Russia, and stated: Western countries are trying to prevent Russia from winning the war by increasing pressure, and in this regard, they are looking to deprive Russia of the income it may have.
Saying that Russia, on the other hand, is trying to win this war at any cost and is ready to pay for it, he noted: There are different analyzes regarding the conditions under which Russia entered this war, some see that country being entrapped by the West and the United States and some others believe that Russia has deliberately entered into this war to change global geopolitics and the balance of power in the world, taking into account the costs it incurred. Both of these analyzes may be true, but up to this point, even though the pace of the war progress is not according to what Russia had calculated; it can be said that compared to the Westerners, they are closer to the goals they had already set.
Russians specialize in winter warfare
The analyst of international economy stated that Russia is specialized in winter war due to its past experiences of war, adding: Generally, in cold conditions, time has been in favor of the Russians and they have been able to have the upper hand by using the climatic advantages. . Even now, the West needs Russian energy, including oil, gas and coal, and on the other hand, it has not been able to equip and mobilize the necessary alternative resources and reach its goals despite the hopes and claims it had.
Fakheri added: Although the United States and other European countries succeeded in decreasing the price of oil from around 110 dollars to around 95 dollars by using their energy reserves, it is far from their ideal price and the Russians still have a better position in this regard. The approach of winter will also help Russia.
He reminded: The change of tone of Western countries, their continued efforts to find an alternative solution or reach an intermediate agreement with Moscow shows that their plan to find an alternative for Russia has not been carried out according to their wishes. Although Venezuela has entered the oil market, it is still far from its previous production level, and negotiations with Iran have not been completed yet. Due to lack of investment, Iraq has not reached the desired production capacity, and Saudi Arabia, UAE, Kuwait, and the Arab countries of the Persian Gulf are neither willing nor able to compensate for this shortfall.
The university professor emphasized: Considering such conditions, Western countries are trying to prevent Russia from obtaining more financial resources by setting the price ceiling for buying energy from Russia. Naturally, if the energy market was a consumer market, this could happen, but under the present situation, the energy market is a supply market, and since the balance between supply and demand has not been established, such formulas will not be successful in the short term.
Fakheri explained: When oil and gas are not in the market, either it should be rationed or it should be turned to alternative sources, which could be coal or clean renewable energies. The production capacity of renewable energies cannot be easily increased and they are expensive. Turning to coal, in addition to environmental problems, creates an aggressive and critical position in the internal parties of those countries. Therefore, setting the price ceiling in the long term and when the Russians cannot sell the required amount at the required price may work and gradually limit the capacity of Russian oil and gas exports.
He referred to Russia’s threat to completely cut off energy exports to Europe and said: If we accept that Russia entered this war to change global geopolitics and geo-economics, they will wait and pay a price until in the peak of the energy market, which will be mid or late autumn, their pressures will bear fruit, of course, if the war continues until then.
The analyst of international economy, regarding the perspective of the economic pressures that the West and Russia exert against each other, noted: It is not yet possible to talk about the defeat and victory of one side, because the two sides have not yet approached the acute conditions. Of course, the dispute between Eastern European countries on one hand and North and West Europe on the other hand in relation to Russia, may prevent a consensus decision to be reached in the field of energy.
According to Fakheri, as long as the European countries do not have a common position with the United States, Russia’s hand will be more open to continue its policies, and until Russia cannot create the necessary alliances and coalitions and take over the market by attracting new customers in which it has been successful, the struggle with this situation will continue.
New economic conditions in future
He added: If we see Russia’s effort as a part of a larger scenario in which new poles of power try to change the balance of power, we may come to the conclusion that the two sides will probably reach an intermediate solution in the end.
Fakheri continued by stating that in the future we will see new economic conditions in the countries of the world, adding: The inflation that is currently in European countries and in the form we see it in some way in all countries of the world, sometimes leads to uncontrollable social, political and economic consequences and limits the power of governments in using economic resources. Although global economies have already curbed inflation, for example, we have seen the impact of the increase in British people’s dissatisfaction on the change of the country’s prime minister and the departure of Boris Johnson. In addition, some Western European countries with 10 percent inflation have been forced to abandon part of their previous plans and are adapting themselves to the new conditions.

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