The Kyiv School of Economics has found that the western oil price cap has hurt Russia’s export earnings.
And this despite widespread violations by western shipping companies.
The researchers said the sanctions were ultimately effective. But they also need to be enforced.
A new study The Kyiv School of Economics (KSE) concludes that the West’s price caps on Russian oil have been effective overall, despite widespread violations. Russian oil continues to flow to the global market, and Russia’s export earnings from oil and oil products fell by $15.6 billion, or 29 percent, in the first quarter of 2023 compared to the previous quarter, according to KSE.
In December, the G-7 and the EU imposed a price cap of $60 a barrel on Russian crude. Additional price caps were imposed on a number of refined Russian fuels in February. This means that companies in the G-7 countries and the EU must comply with the price caps if they want to offer shipping, insurance or related services for Russian exports around the world.
95 percent of exports sold above the oil price limit
However, according to the KSE study, 95 percent of the oil sold from Russia’s Pacific port of Kozmino was sold above the price cap. Companies from the G-7 countries handled more than half of the shipments. “The fact that a significant proportion of Kozmino voyages are on Western-owned and/or Western-insured vessels, while nearly all transactions are priced above $60 per barrel, indicates potentially significant price cap violations ‘ the researchers said.
read too
The United Arab Emirates, Hong Kong and Singapore were among the top buyers of crude oil, priced above $60 a barrel in the first quarter, they noted.
KSE Institute
The KFE concluded that stricter enforcement of the existing sanctions is needed. This could take the form of risk-based price cap compliance checks, greater harmonization of countries’ sanctions efforts, and greater transparency in transactions that do not involve Western service providers.
Russian economy wins India and China as main oil buyers
Certainly, the drop in global oil prices in recent months has also contributed to lower export prices for Russia. However, with OPEC+’s decision to cut production by 1.15 million barrels per day, prices have risen again, which may result in higher revenues for Moscow.
read too
“For every $1 per barrel increase in the price of crude oil, the country could receive $2.7 billion in additional export earnings,” the researchers said. In their view, this means that price caps should be lowered further to ensure a “permanent weakening” of Russian export earnings.
The market for Russian crude oil has changed fundamentally since Kremlin chief Vladimir Putin ordered a war of aggression against Ukraine. European countries – formerly Russia’s largest oil buyers – have been almost completely replaced by China and India. The two countries accounted for about 75 percent of total Russian crude oil exports in the first three months of the year.
KSE Institute
read too
This article was translated from English by Steffen Bosse. You can find the original here.