The G7 leading economies and its allies have reportedly stopped reviewing the price cap on Russian oil, even though it is currently trading above the set ceiling. The price limit of $60 per barrel was introduced by the EU, G7 countries, and Australia on December 5. This restriction prohibits Western companies from providing insurance and other services to shipments of Russian crude that are purchased above the set price.
Initially, the EU agreed to review the price cap every two months and make adjustments as necessary, while the G7 stated that it would review the cap’s implementation and adherence. In response to these restrictions, Moscow has banned the sale of oil and refined products to buyers that comply with the cap, and has redirected most shipments away from the West.
As a result, India and China have emerged as key buyers of Russian crude, while oil exporters have found ways to sell the commodity using domestic or non-Western ships and insurance services. These methods have made it difficult for the West to enforce the price cap mechanism effectively.
Despite the rise in crude prices, the G7 has not reviewed the price cap since March and has no immediate plans to do so. In August, the price of Russia’s benchmark Urals crude averaged over $74 per barrel, surpassing the $60 cap for the first time. However, there were talks in June or July about reviewing the cap, but it never formally occurred, according to a diplomatic source.
Furthermore, recent findings have revealed that exports of Russian oil using Western-insured tankers are still ongoing, despite the price of Urals exceeding $60 per barrel. Approximately 40% of vessels carrying oil from Russia’s Baltic and Black Sea ports are owned or insured by companies based in countries that signed up to the price ceiling.
On Tuesday, the benchmark Brent blend prices reached above $90 per barrel, the first time in 2023, following Saudi Arabia and Russia’s announcement to extend their voluntary production and export cuts until the end of the year. However, Brent slightly retreated on Wednesday, settling just below $90 a barrel.
These developments highlight the challenges faced by Western nations in enforcing the price cap on Russian oil. Despite the initial agreement to review and adjust the cap, it appears that the G7 has halted these regular assessments. As a result, Russian oil exports continue to find alternative routes and buyers outside of Western influence. The fluctuating crude prices further complicate the enforcement of the price ceiling, which was originally intended to restrict Moscow’s revenues.
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