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12 Oct, 2022 11:40

G20 host nation warns against Russian oil price cap

US efforts to impose price restrictions drove OPEC+ to cut production, Indonesia’s finance minister says
G20 host nation warns against Russian oil price cap

Washington’s push to impose a price cap on Russian oil exports could affect other commodity markets by setting a precedent that would aggravate global economic anxiety, Indonesian Finance Minister Sri Mulyani Indrawati told Bloomberg on Tuesday.

“When the United States is imposing sanctions using economic instruments, that creates a precedent for everything,” she said, adding that the move would create instability "not only for Indonesia, for all other countries".

A recent decision by OPEC+ to cut oil production derailed Washington’s efforts to lower global energy prices ahead of midterm elections, Indrawati said, pointing out that the move by Saudi Arabia and OPEC+ had been partly driven by US efforts to impose a price cap.

“The Saudi and OPEC response to this is because of exactly that,” Indrawati said.

The Indonesian finance minister also revealed that she had spoken to Saudi officials who told her that, once a price cap establishes a precedent of using commodity prices for geopolitical goals, no one knows which country could be next.

Indonesia left the OPEC cartel in 2016, becoming a net oil importer, but it remains a major exporter of commodities such as natural gas, coal, nickel and palm oil. According to the finance minister, any price restrictions would threaten the economic stability of Indonesia.

Washington’s efforts to set a price cap on Russian oil to deprive Moscow of energy revenue gained support from the G7 countries. But large importers like India and China, along with many developing countries, did not join them.

Last week, OPEC+ announced an oil production cut of two million barrels per day from November. The reduction, which is the largest output cut since early 2020, was approved despite US pressure to pump more.

The cuts will be distributed based on quotas under the OPEC+ deal as of August 2022. The curtailing of output was aimed at stabilizing the global oil market ahead of a seasonal drop in demand and amid fears of a global recession.

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