Russian oil price cap: will it work?

The EU and G7 states introduced a price cap of 60 dollars (57 euros) per barrel for Russian oil on Monday. In conjunction with the partial embargo on oil imports to the EU, the measure is aimed at making it more difficult for Russia to finance its war against Ukraine. A spokesman for the Kremlin said his country had prepared for this eventuality. The press is at odds over the effectiveness of this strategy.

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taz, die tageszeitung (DE) /

Better if this remains symbolic politics

The West will fail with this punitive action, says the taz:

“The Kremlin is allowed to export its 'black gold', but is to make as little profit as possible. This idea fails to recognise the power of the Russians. They can decide at any time not to supply their oil at all, which would immediately lead to enormous price increases on the energy markets. As bizarre as it may sound, the West must hope that its price brake remains purely symbolic and that many loopholes are found. Otherwise oil will become really expensive. The West can perhaps afford that - but the Global South cannot.”

El País (ES) /

Commendable political unity

In El País's opinion, the EU and G7 have got this right:

“Overall, capping export prices is a step in the right direction. The sanctions already imposed on Russia have done considerable damage to the Russian economy, but have not caused it to collapse - as the strength of the rouble and the fact that Moscow's oil revenues for October were at 17.3 billion dollars, more than the monthly average for 2021. The Kremlin is waging an increasingly brutal war and castigating civilians. The democratic countries must respond, and one way to do this is to leave Vladimir Putin without sufficient means to finance his offensive. ... Political unity has prevailed again, and that is undoubtedly a good thing.”

Blog Damijan (SI) /

Too many exceptions and loopholes

The economics professor and blogger Jože P. Damijan does not believe the price cap will have the desired effect:

“The price cap was introduced because it had to be introduced, and in a few months we will very likely find out again that this measure had no significant impact on prices or on Russian income. And that countries will have found many ways to circumvent the price cap, with its numerous exceptions, and import Russian oil.”

Wprost (PL) /

A weak compromise

Wprost is not impressed:

“A candle for the Lord and at least a candle stump for the devil. This is what the EU's decision to pay 60 dollars per barrel for oil transported by land while the embargo on seaborne imports comes into force today. ... The West is patting Zelensky on the back with one hand, commending his heroism, but reaching out to Putin with the other hand to avoid having to freeze over the winter with room temperatures of 19 degrees.”

Der Standard (AT) /

Consequences hard to calculate

At this stage any estimates about the effectiveness of the oil price cap are only speculation, writes Der Standard:

“Whether the undertaking, which was the subject of months of wrangling, will be successful in the end depends on emerging countries such as China and India, but also on Turkey, or in other words, states that are subservient to the Kremlin in different ways. The operation is in any case risky because for the time being the measure is only effective in theory. It is almost impossible to tell what collateral damage this clever and logical-sounding sanction will cause.”

Radio Kommersant FM (RU) /

It could work

According to Radio Kommersant FM, the price cap has already made an impact even before coming into force:

“The discussion about it alone has already affected the price of Russian crude oil. By the end of November, the discount on Urals oil had grown significantly. According to Bloomberg data, the barrel was going for 52 dollars, more than 30 dollars cheaper than the benchmark Brent. Ironically, the 60 dollar cap is even higher than the current Urals price. But that is not the point: the point is to demonstrate that such a measure by the West can actually work.”

Süddeutsche Zeitung (DE) /

Cautious cap more likely to be approved

The Süddeutsche Zeitung explains why a more radical cap of 30 dollars is not a good idea:

“The danger would be great that Putin would then make good on his threat and cut exports to Asia and Africa. That would cause oil prices to skyrocket worldwide and put a heavy burden especially on poor countries. ... A very low price cap would also increase the risk that major buyers like India and China would ignore it. The regulation prohibits Western shipowners and ship insurers from participating in the transport of oil sold at higher prices. But Russia, China and India could bring their own tanker fleets and their own insurance companies into play. In this way, they would not be able to absorb the effects of the boycott completely, but at least partially. It is therefore better to opt for a cautious upper limit that is more likely to be accepted.”

Polityka (PL) /

Things getting tight on the financial market

The decision also affects exports to countries that are neither members of the EU nor of the G7, Polityka explains:

“The G7 cap is significant because it prohibits companies from the EU and the UK from offering financial services (insurance, loans) and transport services for the shipment of Russian oil (to Asia or Africa, for example) at a higher price than the agreed limit. The EU and the UK dominate the market for financial services, so the need to switch to less reliable creditors and lenders will multiply the costs of trading in Russian oil.”

Iswestija (RU) /

Traders are seeking loopholes

Commenting in Izvestia, economics professor Evgeny Smirnov suspects that the price cap will be circumvented:

“Russian oil exports have been locked in for years, and it is unlikely that market participants will accept the new conditions immediately. ...Traders will therefore look for loopholes to circumvent the EU demands. In addition, Russia will try to further increase its exports to Asian countries and therefore use the services of shipping companies and insurance companies in India and China. Furthermore, the large capacities of a 'shadow tanker fleet' could be deployed for Russian oil exports. Ultimately, the behaviour of market participants will mean that the price caps will not have as great an impact as currently expected.”