Russia has enough potential to ship most of its oil out of the G7 price cap’s reach, underlining the limitations of an ambitious plan to curb its revenue.
The Group of seven countries had agreed to impose a price cap on oil prices last month, as a punitive measure against Moscow’s invasion of Ukraine. The price cap was agreed at an enforced low price by December 5.
Meanwhile, Europe has been scrambling to rein in soaring energy prices due to a supply crunch exacerbated by the war in Ukraine.
Main players in the oil market were concerned about the effect of the move in the global oil industry across the globe.
Concerns that Russia would be able to escape the price caps with their own ship and services lingered against the backdrop of months of discussions between the United States and insurance, trading and shipping firms that have flagged worries on their exposure to sanctions.
A U.S. treasury official told Reuters that 80-90% of Russian oil will continue to flow outside the cap mechanism are not unreasonable.
Hence, only between 1 to 2 million barrels per day of Russian crude could be curbed in case the country even refuses to agree to the cap. Russia exported over 7 million barrels per day in September.
Russia would incur costs due to longer voyages, but the efficacy of the plan is yet to be proved.
The limits of the plan have been underlined by industry and policy veterans with the scope largely uncertain.
