Price cap on Russian oil will hit Putin immediately, says US

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03rd Dec, 2022. 06:42 pm
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A cap on the price of Russian oil will restrict Russia’s revenues for the “illegal war in Ukraine,” the US says.
Western allies banned paying more than $60 per barrel of Russian crude oil on Friday.
Russia will find it challenging to sell oil over that price.

A cap on the price of Russian oil will restrict Russia’s revenues for the “illegal war in Ukraine,” the US says.

The cap, which was accepted by Western allies on Friday, aims to prevent nations from paying more than $60 (£48) for a barrel of Russian crude oil that is transported by sea.

The law, which is set to take effect on Monday, will increase Western pressure on Russia over the invasion.

Ukraine argued that the Western cap should be cut in half. Russia declared that it would stop supplying to nations that enforce it.

The G7 industrialized nations—the US, Canada, the UK, France, Germany, Italy, Japan, and the EU—proposed the price ceiling in September in an effort to limit Moscow’s ability to fund the conflict in Ukraine.

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The G7, the EU, and Australia said in a joint statement that the choice was made to “prevent Russia from benefitting from its campaign of aggression against Ukraine.”

The price cap, according to US Treasury Secretary Janet Yellen, would also further restrain Russian President Vladimir Putin’s financial situation and “limit the revenues he’s using to fund his brutal invasion” while preventing disruptions in global supplies that could drive up gasoline prices globally.

“With Russia’s economy already contracting and its budget increasingly stretched thin, the price cap will immediately cut into Putin’s most important source of revenue,” she said in a statement.

UK Chancellor Jeremy Hunt declared that his country would not change its position and will keep seeking out new approaches to “tight down on Putin’s financing lines.”

The price cap deal was reached just a few days before the EU-wide embargo on the import of Russian crude oil by sea, which takes effect on December 5th.

The price cap is designed to work in conjunction with that and influence oil exports globally.

Only oil and petroleum products that are sold at prices equal to or lower than the price cap may be purchased by nations that agree to the G7-led policy.

The Western friends of Ukraine also want to refuse insurance to ships carrying Russian oil to nations that disregard the price ceiling. Russia will find it challenging to sell oil over that price as a result.

According to senior Russian lawmaker Leonid Slutsky, the EU’s cap puts its own energy security at jeopardy.

Russia will undoubtedly feel the effects of the sanctions, but the impact will be somewhat lessened by its decision to sell its oil to other markets, such as India and China, who are currently the two biggest consumers of Russian crude oil.

According to the International Energy Association, in 2021, more over half of Russia’s oil exports travelled to Europe. The Netherlands, Poland, and Germany were the top three importers.

However, since the conflict, EU nations have been frantically working to reduce their reliance. While the UK intends to phase out Russian crude by the end of the year, the US has already prohibited it.

Price cap on Russian oil will hit Putin immediately, says US

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