G7 and the UK are discussing a reduction of the price cap they imposed on Russian oil exports in a bid to hurt the country’s oil revenues. The cap has become “meaningless” in the current international oil price context, The Guardian reported, citing unnamed experts.
The G7 imposed the cap back in 2022, tying it to Western insurance and tankers. If Russian oil exporters wanted to have such insurance and transport their crude on Western tankers, they had to agree not to sell the crude at prices above $60 per barrel. Yet Trump’s tariff wars have prompted a slump in oil prices and, according to the Guardian experts, it has made the price cap pointless – even though Russia’s flagship Urals blend is trading at over $60 per barrel right now.
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“The cap is currently meaningless,” Clayton Seigle, a senior fellow at the Center for Strategic and International Studies think tank, told The Guardian. “There might be a willingness within the G7 to do this to punish Moscow, especially because there are no real fears about leaving the oil market under-supplied,” Seigle added.
The effectiveness of a lower price cap, however, would be about the same as the effectiveness of the original one. It was not too great because Russia simply dropped Western insurance and Western tankers in favor of domestic and Asian insurers and shipping operators.
“It’s time to revisit the whole way in which we try to restrict Russia’s income from hydrocarbons. Whatever anyone might say, it doesn’t really seem to be working,” Tom Keatinge, director at security think tank the Royal United Services Institute, told The Guardian.
Meanwhile, the price cap has brought some Russian crude below $60, and exporters have taken to using Western tankers and insurers to carry it abroad, Bloomberg reported last week. For this month alone, 43% of the tankers that will carry Russian crude overseas will be Western-owned or Western-insured.
By Irina Slav for Oilprice.com
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