Russia’s flagship Urals crude oil has been trading well above the USD 60 per barrel price cap set by the EU and G7 countries in an effort to curb Moscow’s oil revenues. According to data released by the Russian Finance Ministry, Urals crude averaged USD 74 per barrel last month, higher than the July average of USD 64.37 per barrel but slightly lower than the price in August 2022. In comparison, the average price of Brent crude was USD 86.20 per barrel in August.
The price cap on Russian oil was imposed by the EU, G7, and their allies last December, which prohibits Western shipping, insurance, and reinsurance companies from handling Russian cargoes unless they are sold at or below the set price. A similar restriction was introduced in February for Russian petroleum products. In response to these restrictions, Moscow has banned the sale of oil and refined products to buyers who comply with the price cap.
The average price of Russia’s Urals crude exceeded the USD 60 price cap for the second consecutive month since its implementation, highlighting the resilience of the Russian oil industry. To circumvent the Western restrictions, Russia redirected its oil shipments away from the West and found new buyers in India and China, who emerged as key purchasers of Russian crude.
Despite the price cap, Bloomberg reported that exports of Russian oil using Western-insured tankers continued. About 40% of vessels carrying crude from Russia’s Baltic and Black Sea ports were either owned or insured by companies based in countries that had agreed to support the price cap. This indicates a gap in enforcement and raises questions about the effectiveness of the restrictions imposed on Russia’s oil trade.
The Urals crude’s higher prices demonstrate Russia’s ability to sustain its oil revenues, despite attempts to limit its income. This financial strength allows Russia to navigate the economic consequences of the various sanctions imposed by Western nations.
These developments in the oil market highlight the complex and intricate nature of international trade and the challenges faced in implementing effective sanctions. The ability of certain entities to continue trading Russian oil, despite the price cap, underscores the difficulties in enforcing such measures and the potential for unintended consequences.
In conclusion, Russia’s Urals crude oil has been trading above the price cap set by the EU and G7 countries, demonstrating Russia’s resilience in the face of international restrictions. Despite efforts to curtail Moscow’s oil revenues, Western-insured tankers are still exporting Russian oil, raising questions about the effectiveness of the price cap and the enforcement of sanctions. These developments underscore the complexities of international trade and the challenges in implementing sanctions that have a significant impact on global markets.