The weakness of the Russian oil price cap

Will a price cap on Russian oil sales be a winning move in the Ukraine war? Since the invasion began, Russia has continued exporting crude and refined oil products at barely less than pre-war volumes and at rising prices that have replenished Putin’s coffers. From this week, however, the EU and G7 have imposed a ban on seaborne Russian crude imports and a $60-per-barrel price cap to be enforced by banning western shipping and insurance firms from handling Russian shipments sold above the price cap.

But as I write, $60 is actually the market price of Urals crude – which has lately been trading at 25 per cent below Brent crude – so the cap won’t make much immediate difference to Moscow. Hence President Zelensky of Ukraine calls it a ‘weak’ measure, while stories abound of Russia buying up a ‘shadow fleet’ of up to 100 elderly oil tankers that will continue carrying its oil to India, China, Turkey and elsewhere without the benefit of Lloyd’s of London insurance.