US-led price cap on Russian oil 'almost completely circumvented'

The US-led price cap on Russian oil is being largely ignored, according to Western officials and Russian export data. 

"Almost none" of the shipments of seaborne crude oil in October stayed below the maximum $60-a-barrel limit imposed by the G7, the EU and Australia last December, a senior European government official told the Financial Times. "The latest data makes the case that were going to have to toughen up…  there's absolutely no appetite for letting Russia just keep doing this."

The measure bars Western shipping and insurance companies from assisting with any oil sold above the price cap. It was designed to squeeze Russian oil revenues as punishment for its invasion of Ukraine, while keeping Russian crude flowing in global markets as G7 members "tried to avoid a supply crunch and price spike that would benefit Moscow".

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But a "rally" in global oil prices this year has meant "much of Russian oil has traded above the cap", according to Reuters. The average price was above $80 per barrel, according to official Russian statistics.

Discussions around the future of the price cap were "high on the agenda" of the US-EU summit in Washington last week, said Agathe Demarais, from the European Council on Foreign Relations, in Foreign Policy. Debate is currently "raging" about what to do with the cap, with proponents arguing that it represents "a critical tool to curb the Kremlin's ability to finance the war in Ukraine", while critics believe that Russia "easily dodges the cap, rendering it ineffective". 

But the reality is "more nuanced", said Demarais. The oil price cap has "largely succeeded" in lowering Russia's revenues, but based on "precedent set by other sanctions regimes", it was "always clear" that Russia would eventually manage to evade it.