President Vladimir Putin signed a decree on Tuesday that forbids the delivery of crude oil and oil products to countries that implement price caps starting on February 1 for a period of five months. This was Russia's long-awaited response to a Western price ceiling.

In response to Moscow's "special military operation" in Ukraine, the Group of Seven major nations, the European Union, and Australia agreed this month to a $60 per barrel price restriction on Russian crude oil that would take effect on December 5.

The edict was announced as a direct response to "activities that are unfriendly and inconsistent to international law by the United Governments and foreign states and international organisations joining them" and was posted on a government portal and the Kremlin website.

The decree specifically mentioned the United States and other foreign states that have implemented the price cap, stating that "delivery of Russian oil and oil products to foreign entities and individuals are banned, on the condition that in the contracts for these supplies, the use of a maximum price fixing mechanism is directly or indirectly envisaged."

The edict read: "This...comes into force on February 1, 2023, and applies until July 1, 2023." It also contained a provision allowing Putin to override the prohibition in exceptional circumstances.

Crude oil exports will be prohibited starting on February 1, but the Russian government will decide when oil products will also be prohibited; this date may be post-February 1.

As the oil price cap reduces export income, Russia's budget deficit in 2023 may be higher than the targeted 2% of GDP, according to Finance Minister Anton Siluanov. This presents Moscow with an additional financial challenge as it spends extensively on its military campaign in Ukraine.

However, according to some analysts, the cap won't have much of an immediate effect on Moscow's existing oil profits.