Price Cap Has Fallen Short of Its Potential Despite Costing Russia $36 Billion

A year after the G7 price cap on Russian crude oil was introduced, the measure has managed to curtail some of Moscow’s export revenues but has “failed to live up to its potential,” the Centre for Research on Energy and Clean Air (CREA) said in a new report on Tuesday. The U.S. has been leading the efforts of the G7 and the EU to impose sanctions and embargoes on Russian crude oil and fuel exports. The price cap of $60 per barrel of Russian crude oil says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect on December 5, 2022, when the EU imposed an embargo on imports of Russian crude oil. “While it is clear that the sanctions have not reduced the Kremlin’s resolve for war one year on, CREA analysis can reveal that the EU oil import ban and G7 price cap have cut the country’s export earnings from oil by 14%,” CREA said today. The import ban and the price cap have cost Russia $36.8 billion (34 billion euros) in export revenue, according to CREA’s estimates. That impact “is far short of what could have been achieved,” the center’s analysts wrote, and added that “The price cap has had an impact but has failed to live up to its potential.” The sanctions impacted heavily Russia’s export revenues in the first half of 2023, but “a failure to enforce, strengthen and consistently monitor the price cap has allowed Russia to undo the impact in the second half of the year,” CREA’s analysts say. The West has been considering toughening up the sanction enforcement on evaders of the price cap on Russian oil, almost none of which now trades below the ceiling of $60 per barrel. In recent weeks, the U.S. has sanctioned several vessels and their owners for violations pertaining to the oil price cap set on Russian crude oil.