Russia shrugs off new EU oil price cap, says it is immune to sanctions

Russian government and trading sources played down the impact of new restrictions on trade in Russian crude that the European Union approved on Friday in a new package of sanctions against Moscow over the conflict in Ukraine.

Kremlin spokesman Dmitry Peskov also said Russia had built up a certain immunity to Western sanctions.

Russia has managed to sell most of its oil above a price cap of $60 a barrel that the Group of Seven Western economies have tried to enforce as the G7 mechanism makes it unclear who must police its implementation.

Since April 1, Urals oil has been mostly trading below $60 anyway as the price of global crude benchmarks BRN1! has fallen. The current Urals price in Russian ports is around $58 per barrel, according to Reuters calculations.

The EU sanctions seek to be more effective by setting a moving price cap at 15% below the average market price of Russian oil, EU diplomats said. That means roughly $47.60 per barrel at present.

"We have repeatedly said that we consider such unilateral restrictions illegal; we oppose them," Peskov told a daily conference call with reporters.

"But at the same time, of course, we have already acquired a certain immunity from sanctions; we have adapted to life under sanctions ...

"Furthermore, each new package adds a negative effect for the countries that join it. This is a double-edged sword."

TRADERS DOUBT EFFECTIVENESS OF NEW MEASURE

Traders doubt the new EU sanctions will significantly disrupt Russian oil trade, though sellers might face more challenges in booking the vessels and increased transport costs.

"The $60 price cap hasn't worked, do you think $47 will work?" said a Russian government source who asked to remain anonymous.

Analysts have said the absence of the U.S. from the EU's price capping scheme will further erode its effectiveness.

One Russian trader said European sanctions were not critical and only U.S. sanctions were influential.

But he said trade would be more challenging for some Western shippers, including some from Greece, who had been increasingly involved in the Russian oil trade. If some players quit, freight costs might rise, he said.

Another trading source said Russian oil's "toxicity" would not increase due to the sanctions, although the options for any diversification had now shrunk further.

Russia sells 80% of its exports to China and India, while Turkey also takes a significant chunk of Russian oil.

Russia still sells some oil via the Soviet-built Druzhba pipeline to Hungary, Slovakia and the Czech Republic.