Price Cap Against Russian Oil Underway

…Russia reported to have discretely assembled a “shadow fleet” of tankers to contain price cap.

The orchestrated price cap of $60 per barrel over Russian oil took effect yesterday. The cap, which is being enforced by the G7 and supported by the EU, is aimed at curbing Russia’s revenues from oil export.
The G-7 countries include Canada, France, Germany, Italy, Japan, the U.K. and the U.S. the group and EU allies believe that Russia’s effectiveness in the Ukraine war is owed to the huge earnings it derives from its crude oil and gas.

While seaborne oil imports from Russia took effect yesterday, in mid-February, the import ban will extend to refined Russian products. The cap will however be subject to adjustments every two months, starting in mid-January.

The EU has also imposed an embargo on maritime imports of Russian crude, also effective yesterday. The new provision is that Russia can export crude oil, ship it, and insure it using the services of Western companies only if it sells it at $60 per barrel or less.

Also Read: EU Focuses On Getting Members Accept The $60pb Cap For Russian Oil Prices

The biggest shipping and maritime insurance firm are located in Western Europe and the U.S. Reuters stated that the blocs pursuing oil cap against Russia assume it would be enough to bind the defiant country to their conditions.

Russia, however, has stated it will not sell oil to countries enforcing the price cap and reiterated this statement this weekend.

Deputy Prime Minister, Alexander Novak, was quoted by Reuters, saying, “We will sell oil and petroleum products only to those countries that will work with us under market conditions, even if we have to reduce production a little,” he also said.

Analysts are unsure when the effect and consequence of the price cap will kick in against Russia, even as Reuters noted the wide discount to Brent at which Russian crude trades.

Also Read: Oil Price Cap: ‘Anti-Market Measure’ Against All Global Players – Russia

Meanwhile, as the West and their allies introduce the price cap, there were reports that in an effort to contain the effect of international restrictions on its oil sales, Russia discretely assembled a “shadow fleet” of more than 100 tankers.

Financial Times [FT], quoting sources among shipping brokers and industry analysts, said the largely anonymous tanker purchases can be tracked by the big increase in unnamed or new buyers appearing in registries.

“The vessels are generally 12-15 years old and would be expected to be scrapped in the next few years,” said Anoop Singh, head of tanker research at Braemar. — Financial Times

“We’ve seen quite a number of sales to unnamed buyers in recent months, and a few weeks after the sale many of these tankers pop up in Russia to take their first load of crude,” Craig Kennedy at Harvard’s Davis Center for Russian and Eurasian Studies told the Times.

Also Read: EU Agrees To $60 Oil Price Cap Against Russia

FT reasoned that since the EU won’t be importing Russian oil starting yesterday, the scheme targets Russia’s global oil trade, which relies heavily on Western companies.

At a press conference on December 1, the Russian foreign minister, Sergey Lavrov, was quoted saying: “We have no interest in what the price cap will be. We will reach direct agreements with our partners. The partners working with us will disregard these caps and will give no guarantees to those who impose such caps illegally,”

Russia is said to be looking to bolster its exports to China, India, Turkey and other countries that have greatly boosted their purchases of Russian oil as other countries reduce them.