On 5 December 2022 the G7 countries, the European Union (EU) and Australia imposed a $60 per barrel price cap on Russian seaborne crude. The price cap essentially bars Western and Australian companies from buying, insuring or transporting Russian crude for above $60. The price cap was imposed in response to Russia’s invasion of Ukraine and was later expanded to include refined products in early 2023. It mainly aims to limit Russia’s revenues derived from the sale of crude oil and refined products.  

GlobalData conducted a poll in August and September 2023 to understand the efficacy of the $60 per barrel price cap on Russian seaborne oil.

The poll received 224 responses with nearly two-thirds of respondents opining that the price cap is mitigated by exporting crude to other countries that didn’t impose any sanctions on Russia and can buy crude without using the Western companies’ services. In particular, countries such as India and China are seen as the biggest beneficiaries by buying high volumes of Russian crude at discounted prices. There were also apprehensions that the refined products made in India and African countries using Russian crude are being sold in the European markets, defeating the very purpose of the price cap.

However, the price cap has impacted Russian oil revenues and 19% of respondents expressed the same opinion. Russian oil and gas revenues decreased by around half in the first half of 2023 when compared to 2022. The price ban certainly has some role to play in the revenue downfall, prompting the Russian government to decrease oil production and alter taxation.

A further 19% of the respondents opined that the price cap may be working, but it is leading to higher oil prices. The OPEC+ deepening crude production cuts, coupled with the price ban and strong demand for crude, have resulted in the rise of global crude oil prices.

The $60 price cap imposed by the EU, the G7 countries and Australia has certainly squeezed Russian oil revenues. However, Russia seems to be relatively successful in evading the full impact of the price cap with the G7, EU and Australia coalition apparently halting even regular reviews of the cap’s effectiveness.

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By GlobalData