Russia’s central bank just issued a warning about ‘new economic shocks,’ and it shows the new $60/barrel cap on oil is working

• The price cap on Russian crude and EU’s oil embargo present “new economic shocks,” the Bank of Russia said.

• They could “significantly reduce” Russia’s economic activity in the coming months, per the bank.

• Russia is mulling options to counter the price cap, including banning oil sales to some countries.

Despite the Kremlin’s general skepticism over the West’s myriad economic sanctions, analysts at the country’s central bank foresee “new economic shocks,” thanks to a $60 per barrel price cap on Russian oil and the European Union’s ban of the country’s crude.

The European Union, G7, and Australia have set a price cap for Russian crude that kicked in on Monday. On top of that, the EU has also banned all seaborne Russian crude.

The two measures could “significantly reduce” Russia’s economic activity in the coming months, analysts at Russian central bank’s research and forecasting department said in a report on Wednesday. They caveated that their findings may differ from the official position of the institution.

The uncertainty posed by the sanctions and restrictions came just as Russia’s economy overcame a “short-term decline” caused by President Vladimir Putin’s partial mobilisation of men for the Ukraine war in October, according to the central bank. The bank’s analysts attributed to recovery to an increase in government orders of goods.

While Western price and import restrictions on Russian oil could curtail the country’s economic activity in the short term, the analysts said the country’s production could decline in the longer term.

Russia’s oil production has already decreased slightly in October, the analysts added in their report, and its dynamic in the future “depends on the effect of various restrictive measures on the part of unfriendly countries.”

Moscow has denounced the West’s price cap on its oil exports and is still working on a response to to the restrictions, Kremlin spokesman Dmitry Peskov said on Wednesday, according to state-owned news agency RIA Novosti.

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Russia is considering several options to counter the price cap, including banning oil sales to certain countries and setting a maximum price discount for its flagship Urals crude against Brent oil, Russian business daily Vedomosti reported Wednesday, citing two sources close to the cabinet.

Alexander Novak, the deputy prime minister said on Sunday the price cap an “interference” that could cause “destabilization, shortages of energy resources and reduction of investment” in the market, according to TASS, another state-owned news agency.

The price cap is already causing shipping disruption — oil tankers are piling up off the coast of Turkey because Ankara is demanding paperwork that the vessels are fully insured, the Financial Times reported on Monday.

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