An oil tanker is moored at the Sheskharis complex, part of Chernomortransneft JSC, a subsidiary of Transneft PJSC, in Novorossiysk, Russia, on Oct 11, 2022, one of the largest facilities for oil and petroleum products in southern Russia. (PHOTO / AP)

MOSCOW/NICOSIA – Russia does not exclude the possibility of moderately reducing its oil production given the "uncertain situation" caused by the decision of the European Union and the Group of Seven to cap the price of Russian crude, a senior official said Tuesday.

"Russian oil is in demand on world markets and will find its buyers … Yes, logistics mechanisms and chains will change now. Nevertheless, we do not see any tragedy here," Deputy Prime Minister Alexander Novak, who is in charge of Russia's energy affairs, told reporters.

The environment is more challenging, but we will continue to sell oil using new insurance mechanisms, new ways of cooperation between companies, and new means of transportation.

Alexander Novak, Russian Deputy Prime Minister

Moscow does not accept the price limit imposed in an artificial and non-market way, which can only lead to a global decline in investment, a shortage of oil supplies and finally an even greater increase in prices, Novak warned.

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"The environment is more challenging, but we will continue to sell oil using new insurance mechanisms, new ways of cooperation between companies, and new means of transportation," he said.

EU member states agreed last week on a $60 per barrel cap on the price of Russian seaborne crude. Insurance, finance and other services for Russian oil shipments will be banned if the fuel sells for a higher price than the limit. 

In September, finance ministers of G7 countries agreed to impose a price cap on Russian oil.

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Cyprus' loss

Meanwhile, Cyprus has lost 20 percent of its oil tanker tonnage as a result of the EU sanctions on Russia relating to crude oil, Shipping Deputy Minister Vasilis Demetriades said.

Demetriades told state-run CyBC radio that since the EU announced its intention to impose a ban on seaborne Russian oil on Oct 6, tankers of 900,000 gross tonnage, or 20 percent of Cyprus's tanker tonnage, have been struck off the country's registry.

Oil tanker ship SCF Samotlor sails under Yavuz Sultan Selim bridge as it crosses the Bosphorus strait after departing from Russia's Novorossiysk port, in Istanbul, Türkiye, on March 1, 2022. (FRANCISCO SECO / AP)

Cyprus Shipping Deputy Minister Vasilis Demetriades said since the EU announced its intention to impose a ban on seaborne Russian oil on Oct 6, tankers of 900,000 gross tonnage, or 20 percent of the country's tanker tonnage, have been struck off its registry

This represents about 10 percent of the total ship tonnage under the Cypriot registry, he said.

Two other EU countries with large shipping registries, Greece and Malta, are understood to have suffered even bigger losses.

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"We have asked the European Commission to adopt compensatory measures to offset the losses to all shipping countries caused by the punitive measures imposed on Russia in response to its military operations against Ukraine," he said.

Demetriades said that Cyprus is preparing and will submit by the end of January specific proposals for the compensation of countries that suffered shipping losses.

"We are doing our utmost to ensure the sanctions are effective, but also to protect the shipping sector," he said.

Cyprus's shipping registry ranks third in the EU and eleventh in the world.

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The country is also the largest EU third-party ship management center and is among the top three in the world, with its maritime industry contributing close to 7 percent to its annual economy, estimated at about 26 billion euros ($27.3 billion) in 2022.