News from the Financial Associated Press on January 11 (edited by Liu Rui)Russia is losing $172 million a day in lost revenue after the G7 imposed price caps on Russian oil, according to a Finnish research institute.
The agency also expects Russia’s daily revenue losses to widen after the Feb. 5 price-cap measure was extended to include refined products.
Price caps affect Russian government revenue
In order to limit Russia’s income from oil, the G7, the European Union and Australia have previously decided that from December 5, 2022, the price of Russian seaborne oil will be capped at US$60 per barrel. The European Union’s ban on Russian oil came into effect at the same time. The European Union officially banned the import of Russian crude oil on December 5 last year.
The Center for Energy and Clean Air Research (CREA) in Helsinki, Finland, said Russia had so far exported more than $3.3 billion worth of crude oil within the price cap, most of which was taxed by the Russian government. The price cap cuts Russian government revenue by an average of $172 million a day.
CREA said in the report that from February 5 this year, once the price ceiling limit is extended to refined products, Russia’s daily revenue loss will rise to 280 million US dollars.
CREA claims the study provides further evidence of the impact on Russia of restrictions imposed by the Group of Seven (G7) nations and associated EU sanctions. Russia’s flagship crude, Urals, is currently selling for less than half of international crude prices.
“The EU oil ban and oil price cap are finally kicking in and the impact is as significant as expected,” said Lauri Myllyvirta, chief analyst at CREA.
G7 may further curb Russian income
CREA said the EU should seek to further tighten pressure on Russia. If the G7 further lowers the oil price ceiling from US$60 to US$25-35 per barrel, it will still be higher than Russia’s production and transportation costs, but it will reduce the country’s daily oil export revenue by at least another 100 million yuan, the agency said. EUR.
“It is necessary to lower the price ceiling to a level that deprives the Kremlin of oil profits and restricts imports of the remaining oil and gas from Russia,” Milivirta said.
CREA also said that if the G7 imposed price caps alongside other measures, such as tougher penalties for non-compliance and additional sanctions on tanker sales, it could reduce Russia’s fossil fuel revenue by another 200 million euros a day.
However, CREA’s proposal may actually be difficult to implement. Although the G7 may further tighten restrictions on Russia, Russia can also push up international oil prices by cutting energy supplies – a move that the Russian government has repeatedly threatened to take.
Once Russia adopts this approach, Europe and the United States will be forced to face higher energy costs and further push up their already high inflation.
Russian President Vladimir Putin has said in recent days that the G7’s price cap measures are “illegal” and Russia is looking for ways to break the limit.